Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988)

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Abstract
A cross-sectional analysis of all trading suspensions that occurred during the period 1974-1988 in the New York Stock Exchange reveals that, though the desire to maintain price continuity remains an important motivation to suspend trade, inventory-imbalance fears are pronounced for large firms. Adverse-selection concerns afflict all news-related suspensions irrespective of firm size. Furthermore, we find substitutability among the various dimensions of liquidity: Although large-cap stocks have lower bid-ask spreads, they halt more often. A time series analysis shows that the resiliency of the exchange - its ability to absorb severe volatility shocks - has improved in this period

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