I’ve received a few emails lately from people that go a bit like this:
“I woke up this morning to find stock XYZ corp. halted pending news. Now what?”
Adding to the frustration is that the information concerning a halt is sparse and the process is often proprietary on the different exchanges.
Why is my stock halted?
A halted stock is normally the result of some pending news or other action that is expected to move the price of the stock in question. Actually there are a lot of reasons why a stock could be halted but generally there are two possible bodies that can enact a halt on a security:
An SEC halt. Federal law allows the SEC to halt a stock immediately for up to 10 days. The idea is to protect investors against inadequate information, all forms of fraud, “serious questions” about a company, or possibly an impending investigation. NYSE and NASDAQ stocks will normally resume within 10 days of the halt, while OTC stocks must be put through an audit by a broker-dealer to resume. An SEC halt is usually bad news for a company and its share price.
An exchange halt. Exchange halts are further divided between regulatory and non-regulatory types.
- Regulatory halts are much more common and can be applied for a large number of reasons, the most common of which is a pending news or press release. After news the most common regulatory halt would be failure to comply with listing requirements or other required filings from the exchanges.
- Non-Regulatory halts occur when there is unbalanced buy or sell activity on a security. When a large imbalance occurs trading is halted to prevent an unfair market.
As of this writing there are 12 common halt codes used by NASDAQ / NYSE exchanges. OTC exchanges have 5. The most common are the T1 – T12 halt codes but you can see a complete list of the current stock halt codes in the table below.
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Okay so what should I do now?
- Don’t panic. Most news based halts will resume trading in as little as a few hours. Scan message boards, twitter, and other news aggregators like Google Finance for answers and opinions.
- Digest the news and make a decision on your trade based on the new information. When the stock resumes trading buyers or sellers will often be moving the price erratically. You might want to wait and see how the market reacts to the news before making your decision.
- When trading, be sure and use limit orders as market orders can result in mistakes during heavy volume.
NASDAQ maintains an updated list of the latest stock halts covering NASDAQ and the NYSE.
The OTCBB maintains its own list.
The SEC maintains a PDF document on halted securities.
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