Quick Answer
A halt cross is the single-price auction that reopens a halted security. It publishes an order imbalance indicator every second and prices by ladder: most shares paired, least imbalance, the entered price leaving shares unexecuted, then tie-breaks. Where not all shares would execute, all eligible interest executes there in price, display and time priority. Circuit breaker reopenings are collared.
The reopening auction belongs to the primary listing market, which is why an off-exchange member has to wait for it. The Nasdaq halt cross rule and the Nasdaq market-wide circuit breaker rule are the worked example of how one such auction is built.
What Does a Halt Cross Do?
The halt cross is the process for determining the price at which eligible interest shall be executed at the open of trading for a halted security, and for executing that eligible interest.
For Nasdaq-listed securities that are the subject of a trading halt or pause initiated under the halt categories the processing paragraph lists, the halt cross occurs at the time the exchange specifies, and trading in the security commences when the halt cross concludes.
A market-wide circuit breaker halt is not one of the categories in that list. Its reopening runs under its own paragraph, described further down this page.
Exam Tip: Gotchas
- Trading resumes when the cross concludes, not when the halt is lifted. The cross is what reopens the security, so the resumption time is the conclusion of the auction.
What Interest Takes Part in the Cross?
Eligible interest is any quotation, or any order that has been entered into the system and designated with a time-in-force that would allow the order to be in force at the time of the halt cross.
Two imbalance terms sit beside it:
- An imbalance is the number of shares of eligible interest that may not be matched with other order shares at a particular price at any given time.
- A market order imbalance is the number of shares of eligible interest entered through market orders that would not be matched with other order shares at the time of the dissemination of an order imbalance indicator.
Exam Tip: Gotchas
- Eligible interest is defined by time-in-force, not by order type. An order participates because its time-in-force keeps it in force at the moment of the cross, so a resting order that expires first is simply not eligible interest.
- An imbalance is measured at a price and a market order imbalance at a moment. The first is priced and continuous; the second is fixed to the time the indicator goes out.
What Does the Order Imbalance Indicator Publish?
An order imbalance indicator is a message disseminated by electronic means containing information about eligible interest and the price at which that interest would execute at the time of dissemination. From the beginning of the display only period and continuing through the resumption of trading, the exchange disseminates one every second.
The indicator carries eight items:
| Item | What it publishes |
|---|---|
| Current reference price | The price selected by the ladder in the next section |
| Paired shares | The number of shares of eligible interest paired at the current reference price |
| Imbalance size | The size of any imbalance or market order imbalance, as applicable |
| Imbalance direction | The buy or sell direction of any imbalance or market order imbalance, as applicable |
| Indicative prices | The prices at which the cross would occur if it were to occur at that time: a far clearing price and a near clearing price, each the same as the current reference price |
| Trading pause message | For a trading pause, a separate message with auction reference prices and auction collars |
| Circuit breaker message | For a market-wide circuit breaker halt, a separate message with auction reference prices and the circuit breaker auction collars |
| Other halt message | For the other listed trading halt categories, a separate message with auction reference prices and auction collars |
Notwithstanding the foregoing, the order imbalance indicator will not include the current reference price if there is a market order imbalance.
A second message sits beside it. An order imbalance snapshot is a message disseminated by electronic means containing a subset of the information contained in the order imbalance indicator, in a format optimized for newswire services.
Exam Tip: Gotchas
- A missing current reference price is information, not a data failure. The rule drops it precisely when a market order imbalance exists, so its absence tells the trader something.
- The far and near clearing prices are not two different estimates. Both are defined as the same as the current reference price.
How Is the Current Reference Price Chosen?
The current reference price is picked by a ladder, and each rung is used only where the rung above it leaves more than one price:
- The single price at which the maximum number of shares of eligible interest can be paired.
- If more than one price qualifies, the price that minimizes any imbalance.
- If more than one price still qualifies, the entered price at which shares will remain unexecuted in the cross.
- If more than one price still qualifies, a set of tie-breaks. Several of them cover initial pricing situations, such as an initial public offering or a direct listing, which this course does not teach.
- For another halt type in which the security has already traded during regular market hours on that trading day, it is the price closest to the last Nasdaq execution prior to the trading halt.
- For another halt type in which the security has not already traded during regular market hours that day, it is the price closest to the previous Nasdaq Official Closing Price.
Exam Tip: Gotchas
- Outside the initial pricing cases, the tie-break turns on whether the stock traded that day. A stock that printed before the halt looks back to its last execution; one that never traded looks back to the previous official closing price.
How Is the Cross Price Chosen and Allocated?
The cross price runs on the same ladder the current reference price runs on: maximize shares executed, then minimize any imbalance, then the entered price at which shares remain unexecuted, then the tie-breaks.
Allocation is conditional in its opening words. Where the halt cross price is selected and fewer than all shares of eligible interest available in the market center would be executed, all eligible interest shall be executed at the cross price in price, display and time priority. Displayed eligible interest and orders marked immediate-or-cancel (IOC) rank in time priority ahead of non-displayed eligible interest at the same prices.
All eligible interest executed in the cross is executed at the cross price, trade reported anonymously, and disseminated via a national market system (NMS) plan.
The cross price is the Nasdaq Official Opening Price for stocks that participate in the halt cross, unless the stock has already been traded during normal market hours on that trading day.
Exam Tip: Gotchas
- Displayed interest is not alone at the front of the queue. Orders marked immediate-or-cancel rank in time priority alongside displayed eligible interest, ahead of non-displayed interest at the same price.
- A cross does not always set the official opening price. Where the stock already traded during normal market hours that day, the cross price is just an execution price.
What Happens When No Cross Occurs?
Where a Nasdaq-listed security is the subject of a trading halt and no halt cross occurs, it opens for trading at the time the exchange specifies, in this manner:
- Orders are added to the book in time priority.
- The Nasdaq Official Opening Price is the first market center execution following trade resumption, unless the security has already traded during regular market hours on that trading day.
What Happens to an Immediate-or-Cancel Order in a Still-Halted Security?
An IOC order for a halted security entered before the closing cross, where the halt remains in effect at the commencement of the closing cross, shall either execute in the closing cross or be cancelled immediately after it.
An IOC order for a halted security entered after the closing cross, where the halt remains in effect at 8:00 p.m. Eastern, or 5:00 p.m. Eastern in the event of a scheduled early close, shall be cancelled at that time.
How Does a Security Reopen After a Circuit Breaker Halt?
A Level 1 or Level 2 trading halt, called an MWCB halt after the market-wide circuit breaker, is terminated when the exchange releases the security for trading. For any such security listed on that exchange, prior to terminating the halt there is a 15-minute initial display only period, during which market participants may enter quotations and orders in that security.
Before the reopening, the exchange sets two things:
- The auction reference price: the exchange's last sale price, either round or odd lot, after 9:15 a.m. Eastern Time but prior to the MWCB halt, and, if there is none, the prior trading day's Nasdaq Official Closing Price.
- The lower and upper auction collars: the lower is derived by subtracting 5% of the auction reference price, rounded to the nearest minimum price increment, or $0.15 for securities with an auction reference price of $3 or less, from the auction reference price. The upper is derived by adding the same amount to it.
The exchange also disseminates an order imbalance indicator every second from the beginning of the initial display only period through the resumption of trading.
Exam Tip: Gotchas
- The auction reference price has a 9:15 a.m. floor. Only a last sale printed after 9:15 a.m. Eastern Time and before the halt qualifies; otherwise the prior day's official closing price is used.
- The $0.15 substitute applies to a low-priced security, not to a wide collar. It replaces the 5% calculation where the auction reference price is $3 or less.
How Do the Auction Collars Move When There Is an Imbalance?
At the conclusion of the initial display only period the security is released for trading unless the exchange detects an order imbalance. Where it does, the exchange extends the display only period for an additional 5-minute extended display only period, and adjusts the collars on the side the imbalance sits:
| Reason the period was extended | Collar that moves | Collar that does not |
|---|---|---|
| The calculated release price is below the lower collar, or all sell market orders would not be executed in the cross | New lower collar: subtract another 5% of the auction reference price, which was rounded to the nearest minimum price increment, or $0.15 where the auction reference price is $3 or less, from the previous lower collar price | The upper collar is not changed |
| The calculated release price is above the upper collar, or all buy market orders would not be executed in the cross | New upper collar: add another 5% of the auction reference price, which was rounded to the nearest minimum price increment, or $0.15 where the auction reference price is $3 or less, to the previous upper collar price | The lower collar is not changed |
At the conclusion of that extended period the security is released unless the exchange again detects an order imbalance. Where it does, the exchange further extends the display only period, continuing to adjust the collars every five minutes in the same manner until the security is released.
During any additional extended display only period after the first, the exchange shall release the security for trading at the first point there is no order imbalance.
Where a Level 2 Market Decline occurs while a security is in a Level 1 MWCB halt and has not been released for trading, the exchange recalculates the lower and upper auction collar prices in that security using the original collar formula.
Exam Tip: Gotchas
- Each move is measured from the previous collar, not from the auction reference price. The 5% or $0.15 step is subtracted from or added to the collar already in effect, so the band widens cumulatively.
- The unexecuted market orders trigger is side-specific here. Unfilled sell market orders move the lower collar and unfilled buy market orders move the upper one, even though the definition of an order imbalance itself speaks of all market orders.
What Establishes an Order Imbalance?
Upon completion of the cross calculation, an order imbalance is established where either of the following is true:
- The calculated price at which the security would be released for trading is above the upper, or below the lower, auction collar price as calculated for the initial or any extended period; or
- All market orders would not be executed in the cross.
Exam Tip: Gotchas
- The test is disjunctive. A calculated price inside the collars still produces an order imbalance where market orders would go unfilled.
What Should You Check on Exam Day?
- Confirm the auction ladder order: maximum shares paired, then minimum imbalance, then the entered price leaving shares unexecuted, then the tie-breaks.
- When the indicator omits a current reference price, read it as a market order imbalance rather than as missing data.
- On a circuit breaker reopening, check which side the imbalance is on; only that collar moves, and it moves off the previous collar price.
- After the first extended period, release happens at the first point there is no order imbalance, not after a fixed number of extensions.
- Ask whether the stock already traded during regular market hours that day before calling any price the official opening price.