# Trading Halt Explained: Definition, Functions, and Causes

![Trading Halt: A temporary suspension of trading for a particular security or securities on one or more exchanges.](https://www.investopedia.com/thmb/TPKvnW-xh4pvHVX6lm-x5FuioYk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/tradinghalt.asp-final-3eca07b2a87f48f5ad9acc6dbb74aa79.png)

*— Investopedia / Julie Bang*

> **Definition**
>
> A trading halt is a temporary suspension of trading in a specific security or securities, often implemented to address significant news announcements, order imbalances, or rapid price changes.

## What Is a Trading Halt?

A trading halt is a temporary suspension of trading for a particular [security](https://www.investopedia.com/terms/s/security.asp) or securities at one exchange or across numerous exchanges. Trading can be halted in anticipation of a news announcement, to correct an order imbalance, as a result of a technical glitch, due to regulatory concerns or because the price of the security or an index has moved rapidly enough to trigger a halt based on exchange rules.

When a trading halt is in effect, [open orders](https://www.investopedia.com/terms/o/openorder.asp) may be canceled and [options](https://www.investopedia.com/terms/o/option.asp) still may be exercised. Trading halts differ from trading suspensions by the SEC, which can stop stock trading for up to 10 days to protect the public and investors.

### Key Takeaways

*   A trading halt temporarily stops trading in a specific security, protecting investors during major announcements.  
    
*   Non-regulatory trading halts balance buy and sell orders and usually last only a few minutes.  
    
*   U.S. regulatory trading halts allow investors time to analyze significant news affecting a company's stock.  
    
*   Circuit breaker rules halt all trading after severe market declines to maintain market stability.  
    
*   The SEC can suspend trading to protect investors if crucial company reports are missing.

## Understanding the Mechanics of a Trading Halt

Trading halts can be regulatory or non-regulatory. Regulatory halts occur when there are doubts about a security meeting standards, allowing time for news assessment, like an FDA drug decision.  

Trading halts provide equal access to price-moving news, stopping early recipients from profiting unfairly over others. Other [material developments](https://www.investopedia.com/terms/m/materialnews.asp) that may warrant a regulatory trading halt include corporate acquisitions and restructurings, regulatory or legal decisions or changes in management.

A regulatory trading halt in a security by its primary U.S. exchange is honored by other U.S. exchanges.

A non-regulatory trading halt can occur on the NYSE (not on Nasdaq) to fix major buy-sell order imbalances. Such trading halts typically last no more than a few minutes until order balance is restored, and the [trading resumes](https://www.investopedia.com/terms/t/traderesumption.asp).

Companies often release sensitive information after markets close, allowing investors to assess its significance. This practice, however, can lead to a large imbalance between buy orders and sell orders in the lead-up to the market opening. In such an instance, an [exchange](https://www.investopedia.com/terms/e/exchange.asp) may decide to institute an opening delay, or a trading halt, immediately at the market opening. These delays typically last a few minutes until buy and sell orders are balanced.

A federal U.S. securities law also grants the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp) the power to impose a suspension of trading in any publicly traded stock for up to 10 days. The SEC will use this power if it believes that the investing public is put a risk by continued trading of the stock. Typically, it will exercise this power when a publicly traded company has failed to file periodic reports like quarterly or annual financial statements.

## Exploring Circuit Breaker Trading Halts

U.S. securities exchanges have standing rules for market-wide trading halts in instances were dramatic price declines threaten market liquidity. Cumulative declines of 7% and 13% from the prior's day closing level in the &P 500 index trigger a 15 minute market-wide trading halt if they occur before 3:25 p.m. ET. A 20% decline in the S&P 500 from the prior's day close halts the stock market for the remainder of the trading day no matter when it happens.

Circuit breakers can also apply to trading in any stock under U.S. trading rules. For stocks priced above $3 and included in the S&P 500 or the Russell 1000 indices, as well as certain exchange-traded products like ETFs, trading is halted for five minutes after sudden moves of more than 5% and lasting more than 15 seconds—up or down—from the average price over the prior 5 minutes. For other stocks priced above $3 the sudden price move required for a trading halt is 10%, while those priced between $0.75 and $3 are halted after a sudden gain or loss of 20% or more.

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. “[Trading Suspensions](https://www.sec.gov/litigation/suspensions.shtml)."
>     
> 2.  U.S. Securities and Exchange Commission. "[Fast Answers: Trading Halts and Delays](https://www.sec.gov/fast-answers/answerstradinghalthtm.html)."
>     
> 3.  FINRA. "[When Trading Stops: What You Need to Know About Halts, Suspensions and Other Interruptions](https://www.finra.org/investors/alerts/when-trading-stops-what-you-need-know-about-halts-suspensions-and-other-interruptions)."
>     
> 4.  U.S. Securities and Exchange Commission. "[Investor Bulletin: Delinquent Filings](https://www.sec.gov/investor/alerts/ib_delinquent_filers.htm)."
>     
> 5.  Investor.gov. "[Stock Market Circuit Breakers](https://www.investor.gov/introduction-investing/investing-basics/glossary/stock-market-circuit-breakers)."
>     
> 6.  Limit Up Limit Down. "[Overview](https://www.luldplan.com/)."