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I don't understand the reasoning behind halting trade after significant drops in index value. If people significantly devalue a stock (or stocks), why would hal
by alexmingoia 7y ago
I don't understand the reasoning behind halting trade after significant drops in index value. If people significantly devalue a stock (or stocks), why would halting trade change that? Halting trade could contribute to devaluation, since it could encourage capital flight to exchanges that aren't halted or have predictable trading hours. If I knew I might not be able to trade tomorrow that's a new incentive to sell now and trade elsewhere.
- wmeredith 7y agoIt's to break the feedback loop where the only reason people are selling is because everyone else is selling.
- alexmingoia 7y agoHow does that work? After exchanges reopen, the last known trades are still sells.
- Pfhreak 7y agoHalting only happens for fifteen minutes. It's meant to be a speed bump, an opportunity to assess, "wait, do I really want to sell right now?" If the market drops a lot, they'll halt for the day. Gives leaders a chance to make adjustments.
- cosmiccatnap 7y agoMaybe but that assumed that what your haulting isn't just an algorithm set by someone...which is almost always is. The algorithm will just continue after the 15m to do what it was doing previously.
- alexmingoia 7y agoAre you referring to automated trading? How can someone sell without assessing whether they want to sell? Isn't that a contradiction? For example, if a grocery store is normally open, and I go there to buy groceries only to found out they're closed... I still need groceries. I would just be forced to wait until they're open or go get them from somewhere else. With that reasoning, I would expect halting trades to encourage capital flight to exchanges with liquidity and predictable operation. People prefer to shop at grocery stores that have predictable hours and stocked shelves.
- deleted 7y ago[deleted]