A stock market halt is a temporary pause in trading for a stock or the entire market. It happens automatically when prices move too fast or manually when regulators (SEBI) need to investigate any unusual activities.
Stock exchanges like NSE and BSE, under SEBI's rules, use haults to control volatility and ensure fair trading.
Types of Stock Market Halts
1. Index-Based Halts: The type of halts that are triggered when NIFTY50 or SENSEX moves 10%, 15%, or 20% in a day.
2. Stock-Specific Halts: The type of halts that are applied when a stock hits its daily price limit (5%, 10%, or 20%).
3. News-Based Halts: The type of halts that are imposed suddenly before or after big announcements like mergers, frauds or a national emergency.
4. Technical Halts: The type of halts that are caused by system failures or connectivity issues.
Why Do Stock Market Halts Happen?
1. To Prevent Panic Selling or Overbuying: Stops extreme price swings and protects investors.
2. To Allow Fair Price Discovery: Ensures every investor gets time to react to market changes.
3. To Stop Market Manipulation: Prevents artificial price movements by large traders.
4. To Investigate Abnormal Activity: Authorities pause trading if any unusual or suspicious trading patterns appear in the stock market.
5. To Fix System Issues: Trading Halts when there are technical problems.
What Happens During A Trading Halt?
During a halt, no trades happen, giving investors time to rethink their moves. These pauses help keep the market stable, fair, and safe for everyone.
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