Volatility halts came from a real emergency. In 2010 the market dropped roughly 9% in about ten minutes with no news, close to a trillion dollars evaporating and returning the same day, set off by an order error and amplified when automated market makers cancelled everything at once. Committees formed. The fix was to stop the market when it moves too far too fast, then reopen with an auction.
For the market as a whole, fine. It’s fired maybe twice in twenty years. For single stocks, which halt every single day, I can’t defend it, and neither of us can explain why anything halts on the upside.
But here’s the part that matters more than the opinion. Every halt reopens with an auction, and that auction is nearly identical to the market open. Everyone gets one print. It’s engineered to maximize the number of shares executed. That makes it a high-liquidity event, and high liquidity is what lets a strategy scale.
So a stock that used to offer two auctions a day now offers two plus however many halts it takes. Most traders never look, because the data doesn’t show up in ordinary open-high-low-close bars.
The traders who hate halts loudest are usually the ones who got burned short in one. That’s emotional, and it’s understandable, and it’s also blinding. Somebody bought the print before that halt.
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Michael Nauss, CMT, CAIA, CDMS