Here's What Happens When Shares Are Halted From Trading

Investors in the United States take for granted that the buying and selling of shares of stock will be accessible Monday through Friday from 9:30 a.m. until 4:00 p.m. in the eastern time zone. Excluding certain major holidays when the market is closed early or altogether, that is. In fact, investors can even trade certain stocks in the hours before and after the market closes in after-hours trading via electronic communications networks, or ECNs. Although after-hours trading isn't without certain risks that investors should be aware of.

But what if trading in a certain stock was suddenly suspended at a time when the market is otherwise open? It's somewhat unusual, but what's called a trading halt can and does occasionally happen. Trading halts fall under the purview of FINRA, which is short for Financial Industry Regulatory Authority, the de facto regulatory body for broker-dealers in the securities industry.

Trading halts often happen concurrent with the announcement of news which can significantly move the price of a stock. This is to prevent certain parties who receive the information early from "front running" the rest of the market. As well, a stock might be halted if a trade imbalance exists. That is, a serious mismatch between the number of buyers and number of sellers of a particular stock. Finally, if an index's value, like the S&P 500, drops rapidly enough, it can trip "circuit breakers" that automatically trigger a trading halt.

Publicly traded companies are obligated to notify their respective stock exchanges, like the New York Stock Exchange or Nasdaq, of any significant news prior to informing the general public. Examples of noteworthy news could include information about a company's product(s), changes in upper management, potential mergers, and the like. At that point, it's up to the relevant stock exchange to schedule a trading halt or not.

Obviously, the decision to halt a stock based on news is used very sparingly. Instead, most news results in unobstructed positive or negative swings in stock price that we witness almost daily involving one company or another. As well, sometimes market-moving news is announced without first properly notifying a stock exchange. An example of this might be an unsolicited offer from one company to purchase another company. Again, regulatory trading halts based on such scenarios are used sparingly to allow stocks to trade freely as intended, for better or worse.

If trading is halted in a particular stock due to extreme imbalances between buyers and sellers, it's typically for a short amount of time — like less than one hour. A good recent example of this exists with the notorious meme stock GameStop (NYSE:GME) which was halted multiple times throughout the day on May 13, 2024. Fueled by posts on X by influencer Keith Gill (a/k/a "Roaring Kitty"), GameStop shares soared over 90% in value at market open, only to be halted to allow the initial volatility to subside. 

Rarely, stock exchanges may halt trading due to non-news or financial driven events, like natural disaster. In these cases, a vast swath of the market may be effected — not just a single stock — and the delay can be significantly greater than just one hour. For instance, following the tragic events on September 11, 2001, the New York Stock Exchange remained completely closed from the day of the terrorist attacks until September 17. When the markets did finally reopen, the blue chip Dow Jones Industrial Average plunged more than 7%.

So what can you do if you want to buy or sell shares of a stock that's been halted? Unfortunately, not much. Obviously, brokerage firms are forbidden from transacting in a halted stock, or even publishing price quotes. Note that over-the-counter (OTC) stocks which aren't traded on major exchanges are nonetheless also subject to halts at the direction of FINRA. In any case, a trading halt is automatically lifted when FINRA gives notice or 10 business days, whichever is sooner. In extreme cases where the Securities and Exchange Commission (SEC) believes that investors are at significant risk, a trading suspension up to 10 business days can be implemented.

However long it lasts, there's little investors can do during a trading halt as far as buying or selling shares of the halted stock(s). Perhaps the best course of action is to be vigilantly aware of when the halt is lifted. Typically, this will only be announced just a few minutes before the halt comes to an end, or sometimes with no warning whatsoever.