A market halt at the Pakistan Stock Exchange (PSX) is like hitting the pause button on all trading. It's a temporary stop designed to calm things down when the market gets too wild, either going way up or way down too quickly.
Why Does It Happen?
Imagine the KSE-30 index as a speedometer for the Pakistani stock market. If this "speedometer" jumps up or down by 5% (a big move!) and stays there for 5 minutes, the PSX hits the brakes.
Purpose of a market halt:
Safeguard investors: It gives investors and market participants time to assess the situation and react to sudden, large price swings, preventing panic selling or excessive speculation.
Manage risk: It allows the National Clearing Company of Pakistan Limited (NCCPL) to collect Mark-to-Market (MTM) losses from clearing members, ensuring financial stability.3
Cooling-off period: It provides a pause for market participants to absorb new information and make more informed decisions, thereby reducing volatility.
How Long Does It Last?
A market halt at the PSX usually lasts for one hour.
What Happens During a Halt?
When a halt is in effect:
Trading stops completely for stocks and related investments.
Any unfilled buy or sell orders are usually canceled.
After the halt, there's typically a short "pre-open" period (like 5 minutes) before trading starts again.
Only those Broker Clearing Members (BCMs) and Non-Broker Clearing Members (NBCMs) who have deposited the required margins with NCCPL are allowed to trade after the resumption.
It's important to note that these rules are subject to change by the PSX and the Securities and Exchange Commission of Pakistan (SECP) based on market conditions and international best practices.