The message from the ASX is clear. Listed entities should consider seeking trading halts more often, to stop uninformed trading and facilitate compliance with continuous disclosure obligations.
Yet the response from listed entities has been lukewarm at best. Heavyweights such as BHP Billiton, Telstra and the Australian Banker’s Association have expressed concern that, given the negative connotations generally associated with trading halts, “a push by the stock exchange for greater use of trading halts ahead of big announcements could unintentionally wipe billions of dollars off the market”.1
However, there is evidence that the use of trading halts is becoming more frequent and more common, particularly amongst smaller companies. But, as Patrick Durkin, journalist at the Australian Financial Review and deputy editor of the Financial Review’s BOSS Magazine, notes:
“…it is important to focus on how appropriate trading halts are being used, not just how frequently.” 2
This paper focuses on how directors, company secretaries, in-house counsel and other company officers can use trading halts to better satisfy their entity’s continuous disclosure obligations.
This issue will typically arise where information concerning an entity – Entity X – is required to be disclosed to ASX under Listing Rule 3.1 but an announcement cannot be released to the market immediately.3
In those circumstances, the following questions need to be answered:
- Should a trading halt be sought?
- How can a trading halt be used effectively?
- What are the benefits of seeking a trading halt?
- What are the limitations to a trading halt?
- How can a trading halt be sought?
- When does a trading halt end?