Trading Halts Explained: What Investors Need to Know

Understanding the basics of a trading halt is essential for an investor. Here are the basics of the trading halt and how it can impact you as an investor.

The Trading Halt

Typically, you will be able to trade a security on the stock exchange anytime that the stock exchange is open. However, sometimes you will have to deal with a condition called a trading halt. During a trading halt, a particular security will no longer be allowed to trade on the market. Any trading on a security that has been halted will be postponed for a certain amount of time.

Reasons for a Halt

There are a few different reasons that a stock exchange may decide to halt trading on a particular stock. If they suspect insider trading or some other manipulative practice, they may decide to temporarily stop trading. Many times, they will also stop it before a major news release that has to do with a particular company. The Securities and Exchange Commission (SEC) may decide to halt trading on a stock if a company fails to file required paperwork.

Investor Impact

During this time, you will have some time to reflect on your investment decisions. You may need to decide whether to try to sell your shares as soon as trading begins or to hold on to them.