Market volatility, circuit breakers, and trading halts

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What is a volatile market?

A volatile market is often characterized by extreme price fluctuations and widespread uncertainty. Nobody knows what to expect, and fear—or euphoria—can grip investors.

During these moments, it can be tough to sit still. Your investment portfolio may seemingly plummet—or soar—based on the smallest whisper: a rumor that the Fed might change interest rates, that the government may approve an industry bailout, or that the president might issue an executive order. It’s hard to guess what impact each development could have on the stock market.

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What’s a circuit breaker?

After the 1987 stock market crash, known as “Black Monday,” the US Securities and Exchange Commission adopted market-wide circuit breakers, or certain thresholds at which trading is halted for a pre-defined period of time. These circuit breakers were updated in 2012 in order to make them more meaningful in today’s high speed electronic markets.

Market-wide trading halts are designed to curtail panic selling during volatile periods. When these take effect, all trading temporarily stops on US equities, options, and futures exchanges.

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What’s a market-wide trading halt?

A market-wide trading halt is like a timeout. It gives everybody a chance to catch their breath and may help slow the stampede of a selloff. Halts are issued by US equities, options, and futures exchanges.

There are three circuit breakers that can trigger market-wide halts in the US:

  • Level 1: The S&P 500 drops 7% from its closing price the previous day, triggering a 15-minute trading halt.
  • Level 2: The S&P 500 drops 13% from its closing price the previous day, triggering another 15-minute trading halt.
  • Level 3: The S&P 500 drops 20% from its closing price the previous day, and trading is suspended for the remainder of the day.

It’s worth noting, Level 1 and Level 2 halts may only happen once per trading day. That means, if the S&P 500 slides by 7% (resulting in a 15-minute timeout), trading would only stop again if the decline reaches 13% or more. Likewise, if the S&P 500 drops by 13% (again, resulting in a 15-minute suspension), trading would only cease if the downturn reaches 20%.

Please keep in mind, Level 1 and Level 2 circuit breakers can only take effect before 3:25pm ET. At 3:25pm ET and beyond, only a Level 3 halt—a 20% decline in the S&P 500—would cause trading to stop for the day.

Regular US stock market trading hours are 9:30am – 4:00pm ET.

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Can I place new orders during a trading halt?

Yes, you can place new orders during a trading halt but they won’t be processed until the market reopens.

Note that all new and outstanding orders will remain “pending” until markets reopen. When the halt ends, your orders will be processed. Please note that market orders held or placed during a halt may fill at a very different price once trading resumes.

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Can I use Robinhood during a trading halt?

Yes, Robinhood will still function. You will be able to view your positions, read your newsfeed, and contact support during a trading halt. While you can place new orders during the halt, they won't be processed until the market reopens.

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What happens to my pending orders during a trading halt?

Outstanding orders, including market and limit orders, won’t be processed until the halt is over and markets reopen; this also applies to options orders. Please note that market orders held or placed during a halt may fill at a very different price once trading resumes.

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Why are charts flat during a trading halt?

When trading is halted, charts reflect the price of the last filled order. No trades are being executed, so prices neither rise, nor fall. Rest assured, the price most likely didn’t flatline at zero. When the market reopens, the chart will display normally again.

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Why do options prices display as $0.01 during a trading halt?

During a trading halt, no orders are being processed so the “mark price” defaults to the $0.01 on your Robinhood app. Market prices will display normally after the halt is over.

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Can I still trade cryptocurrency during a trading halt?

Yes. Halts imposed by US equities, options, and futures exchanges do not directly affect cryptocurrency trading.

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Can I deposit and/or withdraw funds during a trading halt?

Yes. You can deposit or withdraw funds as you normally would.

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I have a concern about an order placed during a trading halt.

If you believe one of your orders was affected by a trading halt and still have questions, please get in touch with our support team. Please provide as much information as you can about the order(s) you placed and share any questions. We’re happy to assist you.

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Update

In response to Russia’s attack on Ukraine, the U.S. and other countries have introduced sanctions to disconnect Russia from global economic access, including restricting access to capital. On February 28, 2022, major U.S. stock exchanges NYSE and NASDAQ halted trading of Russian companies listed on their respective exchanges. That means people are unable to buy and sell those companies through any U.S.-based broker dealer, including Robinhood. Learn more here.

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Brokerage services are offered through Robinhood Financial LLC, (RHF) a registered broker dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (RHS) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (RHC) (NMLS ID: 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. The Robinhood spending account is offered through Robinhood Money, LLC (RHY) (NMLS ID: 1990968), a licensed money transmitter. A list of our licenses has more information. The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard®. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC is not a member of FINRA and accounts are not FDIC insured or protected by SIPC. RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Check out Robinhood Financial’s Fee Schedule for details.

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