Stock Market Updates: What Is Trading Halt And How It Works

Trading Halt: A Trading Halt is an exceptional interruption used to ensure fair trading, by protecting investors’ interests.

The exchange typically informs the public about the resumption of trading at the time of lifting the halt or prior to it. ( Image Source :Getty )

Trading Halt: Sensex and Nifty, the two key equity benchmarks, on Friday plunged sharply. At 1.15 pm, the S&P BSE Sensex slumped over 1,000 points to 59,194. On the other hand, NSE Nifty50 was trading at 17,561, down 331 points. The decline in the market triggered a trading halt for some of the companies listed on the Indian stock exchanges. 

What Is A Trade Halt?

Stock exchanges serve not only as a marketplace for trading but also as protectors of investors' interests. To fulfil this role, exchanges may take strong actions, such as halting trading. A trading halt refers to the temporary cessation of trading for a specific security or multiple securities on one exchange or multiple exchanges. The halt can be either regulatory or non-regulatory in nature. The reasons for a halt can vary, such as an impending news release, addressing an order imbalance, a technical malfunction, regulatory issues, or a result of rapid price movement per exchange regulations. During a trading halt, existing orders may be cancelled and options may still be exercised.

How Does Trading Halt Work

During a trading halt, the exchange prohibits the trading of a specific stock and investors are unable to buy or sell shares. In some cases, the entire exchange may be halted.

The listed company informs the stock exchange of any major developments that could significantly impact the stock price prior to public disclosure. The exchange then halts trading of the stock in question to ensure fair trading.

What Happens During Trading Halt

During a trading halt, the stock exchange informs the market that trading in a particular stock is not allowed. As a result, investors are unable to buy or sell that stock for a specified period. Brokers are also prohibited from publishing quotations.

When trading resumes, it takes place in accordance with established rules. The exchange typically informs the public about the resumption of trading at the time of lifting the halt or prior to it. 

A trading halt is an exceptional interruption implemented to ensure fair trading and protect investors' interests. It can be beneficial for investors who are not fully informed about current developments.