Thing is, most ETF liquidity is provided by high-speed market making algorithms. ETF pricing works through an arbitrage mechanism. To give a contrived example,

Thing is, most ETF liquidity is provided by high-speed market making algorithms. ETF pricing works through an arbitrage mechanism. To give a contrived example, imagine a ETF "Mega-Tech" (MGT) whose composition is 0.75 shares AAPL and 0.25 shares GOOG. At the close of trading, large arbitrageurs can exchange MGT shares in-kind with the ETF issuer for 0.75 shares AAPL and 0.25 shares GOOG or vice-versa. If the ETF is ever trading for more or less than 0.75AAPL + 0.25GOOG, you can make money going long the stocks and short the ETF or vice-versa. So, knowing where AAPL and GOOG are trading, the ETF market-maker sets his bid and offer in MGT such that he can try to trade AAPL and GOOG at a better price to offset his risk and capture a small profit. Since this position is fully hedged, he gets special capital treatment and can accumulate large inventory in the ETF if there's a large imbalance between natural buyers and sellers. Now, imagine AAPL is halted. The ETF market-maker can't hedge his risk or have confidence in what the ETF is worth. At first, he updates his pricing to assume the worst (remember, this is a dumb risk-averse computer, maybe AAPL is halted because it's the next Enron) and bids a lower price. He can't get the same capital treatment on MGT hedged with GOOG or some other ETF, and this is a much risker trade, more of a statistical arbitrage than a pure one, so as people keep selling MGT to him, he hits a risk or capital limit and pulls his bids completely. Real ETFs can have 100s of components. Since this is a mechanical process, high-speed market-makers can charge a very low spread and be the best bid or offer in the market almost all the time. They just trade 100s of ETFs at once to make it up in volume. This drives humans out of the market-making business, since human traders who did the same thing are undercut by machines. Because of this, few well-capitalized human traders are sitting around waiting to pounce on ETFs trading at a massive discount since it rarely happens. They're all doing something else with their lives. A good solution would be not to allow market orders in ETFs when their component stocks are halted, or to halt trading in ETFs when the components are halted. Market stop orders should probably be banned in general. I can't think of any other business dealing where a person would walk into a store and say "I'll buy/sell this at any price", aside from buying lobster on a date.