There are a number of policies that stock exchanges implement to prevent share prices from falling or rising too quickly. ARA and ARBOne policy that may occur when stock prices face a sharp decline or increase is Stop trading
What is a trading stop?
A trading freeze is the policy of an exchange to temporarily suspend trading of shares on that exchange. slightly different from stock suspensionThis policy usually takes place in less than a day. And investors can still edit the entered order information.
This policy generally applies to stocks because of three things: Imbalances in the supply and demand of stocks. System or technical error and important information that the stock issuer will convey This important information is information or news that may affect the movement of the issuer’s share price, such as news of the issuance of new shares. News about changes in financial status Issuing dividends, etc.
With this temporary suspension Hopefully investors will be able to digest and analyze the information sent by the company. To be able to determine appropriate investment and trading strategies. In addition to that, there are Stop trading It is also useful to prevent investors from getting good information in advance. insider trading or do not receive additional profits
Report from the official page Financial Industry Regulatory Authority (FINRA) This policy only applies to stocks that are traded over the counter (OTC) or that are not traded directly to the public. If the stock is listed on another stock exchange and the relevant stock exchange stops trading the stock. For one reason or another
For example, PT ABC shares are sold OTC on the NYSE but publicly traded on IDX. IDX temporarily suspended trading of these stocks for 30 minutes because PT ABC forgot to report news on its stocks to OJK. Due to this suspension, NYSE has the right to suspend trading. Trade ABC shares on the US stock exchange.
Not only that, it is also the cause. Stop trading is the existence of a compulsive condition (force majeure) which encourages the Stock Exchange to adopt this policy These mandatory conditions include natural disasters. economic crisis and others
How does trading stop work?
As the name suggests, when the stock exchange announces Stop trading For some or all stocks on the exchange Trading will be temporarily suspended. during the specified period Investors will not be able to execute orders entered. But you can still edit your order information.
Only after a specified period of time can new trading be started. For example, IDX announced Stop trading All stocks in Indonesia for 30 minutes ranged from 9.00 WIB to 9.30 WIB during this period. Investors cannot execute buy or sell orders. But it can be edited to change the requested price information or the requested number of shares. Only after 9.30 WIB will the transaction be processed.
However, in some cases, this policy period can be extended. For example, IDX suspends trading of A shares for 15 minutes from 10.00 WIB to 10.15 WIB due to the issuer’s disclosure of HMETD information. Stop trading This was necessary so that the stock price did not fall more than 5%. However, it turned out that after this information was revealed, the price of share A still fell by 5%. To prevent a sharp decline, IDX extended the trading suspension period for another 10 minutes.
Stop trading IHSG
Report from CNBCThe Indonesian Stock Exchange (BEI) has implemented a policy of suspending trading on JCI 7 times. This policy is intended to prevent JCI from falling further throughout 2020. IHSG’s trading halt order follows the order of the head of the Capital Market Supervision Department 2A No. S. -274/PM.21/2020 dated 10 March 2020
In the letter, OJK ordered to temporarily suspend transactions for 30 minutes if JCI decreases by 5% in 1 day. Stop trading Continue for 30 minutes if this index continues to fall up to 10% and suspend trading if JCI falls more than 15% in just one day.
According to data during the COVID-19 outbreak, JCI decreased 6.58% on March 9, 2020, decreased 5.2% on March 19, 2020, and decreased 5.01% on September 2020. However, along with the recovery from COVID- 19 19 and the post-pandemic economy, JCI is slowly coming back strong again.
Implications of the trading halt for stock investors
In general, the effects Stop trading For stock investors Investors cannot trade the stocks they hold for a while. In this way, sales and purchase transactions may be prevented even for a short period of time.
Not only that When the trading doors open again This does not exclude the possibility of instability in the stock price. For example, the decision to suspend stock trading on the stock exchange will be announced 30 minutes before the close, because the issuer will hold a press conference. Therefore, the next day the stock price volatility will definitely be higher during the opening hours. This is because investors will make decisions based on the information received from the press release.
So what should investors do? If you are not the type of investor who is taking a high risk risk taking decisions right now. Stop trading Just opened, it would be better if we wait and see the situation first (Wait and see.– Try to analyze the response of other investors or traders to the information just provided by the company before making a decision.
Conclusion
Trading halted It is a policy of suspending transactions of one or all stocks on the stock exchange for less than 1 business day, usually due to technical matters such as big news about stocks. System error and the imbalance between the demand and supply of stocks
This policy can create profits or losses for investors. Losses incurred because an investor is unable to sell or buy desired shares immediately. Considered profitable Because with this policy Investors will have enough time to decide on investment strategies after some stock news is released.
