In the stock market, trading might be suspended when there is some event that could have an abnormal impact on market value of an individual equity. Trading activity could also be halted temporarily for all equities listed on a given stock exchange. Generally, the activity that might trigger a suspension in trading is a negative occurrence. Investors may receive little or no fair warning that trading may stop but may notice some common factors that precede a suspension.
When a regulatory agency, such as the U.S. Securities and Exchange Commission, decides to stop trading in a stock, it could be for one or more of several reasons. Transparency is a key focus of the agency, and if there is any lack of clarity surrounding a company's finances or operations, the stock might cease to trade. An SEC ban could last for up to 10 days, after which time a stock that trades on a major exchange may resume trading immediately.
Trading in an equity security might be suspended from trading in response to signs of fraud, such as insider trading or false marketing materials. In 2011, the SEC banned trading in more than a dozen stocks at once. The securities trade in the over-the-counter market, where pricing can be opaque. The SEC issued the suspension in response to suspected fraudulent information being communicated to public investors on social networking websites on the Internet.
A stock exchange, such as the New York Stock Exchange Euronext, may issue suspension on a company that lists its shares on the trading platform. Such a move might be in response to a company's failure to maintain the listing standards of the exchange. In 2010, the NYSE decided to suspend trading in Ambac Financial Group the day after the company filed for bankruptcy. The value of Ambac's stock also fell below the exchange's $1 market value threshold requirement for more than 30 days.
Trading in the stock market could be suspended in response to some unexpected catastrophe. A temporary ban might be issued if technology is at risk of being compromised or lives are in danger, for instance. On September 11, 2011, when the U.S. was attacked by terrorists, trading never commenced. Trading on the NYSE remained suspended for the remainder of the week before reopening on September 17, 2011.
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