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Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs

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  • William G. Christie
  • Shane A. Corwin
  • Jeffrey H. Harris

Abstract

We study the effects of alternative halt and reopening procedures on prices, transaction costs, and trading activity for a sample of news‐related trading halts on Nasdaq. For intraday halts that reopen after only a five‐minute quotation period, inside quoted spreads more than double following halts and volatility increases to more than nine times normal levels. In contrast, halts that reopen the following day with a longer 90‐minute quotation period are associated with insignificant spread effects and significantly dampened volatility effects. These results are consistent with the hypothesis that increased information transmission during the halt results in reduced posthalt uncertainty.

Suggested Citation

  • William G. Christie & Shane A. Corwin & Jeffrey H. Harris, 2002. "Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs," Journal of Finance, American Finance Association, vol. 57(3), pages 1443-1478, June.
    • Handle: RePEc:bla:jfinan:v:57:y:2002:i:3:p:1443-1478
    DOI: 10.1111/1540-6261.00466
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    References listed on IDEAS

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