July 23, 2025

When Should a Biotech Halt Trading in its Stock?

Regulation Fair Disclosure (Reg FD) goes a long way in making sure all investors are treated equally when it comes to the dissemination of material news by a public company – which is to say that it stipulates everyone has access to new information at the same time. The regulation prohibits selective disclosures and mandates remedies in the event that material non-public information (MNPI) has inadvertently been shared.

There is another safety net at work in the public markets, however, that also aims to make sure all shareholders are treated equally. Both Nasdaq and the New York Stock Exchange (NYSE) have their own requirements, and both have teams of personnel monitoring company news to ensure a level playing field.

Their intent is to avoid a situation in which some investors are able to trade on the back of material news, before others have had time to receive and absorb the same information.

As an example, consider the difference between fund managers and retail investors. A fund manager’s job is to actively watch market activity – and should reasonably be expected to notice, comprehend, and potentially react to news published on or by a public company. Not so an retail investor who likely has a day job unrelated to his or her investments (or might even be retired). Should investors utilizing a fund manager have a time advantage versus those who choose to handle their own finances? You might argue, “yes, that’s what they pay for,” but both Nasdaq and the NYSE say “no,” they should not.

Consequently, at certain times, exchanges will halt the trading of one of their listed stocks (for typically 15-30 minutes, occasionally longer) to give all investors time to both notice and digest material news.

How do they do this? Well, one way this is achieved is that when a biotech issues a press release, a requirement of their listing agreement is to inform the stock exchange ahead of time (note: we always advise our clients that this should be done by the same person who uploads a biotech’s press releases to its respective newswire).

Teams at the respective exchange (called Market Watch teams) then vet the intended disclosure to determine whether or not trading in the stock of the issuing company should be halted. Because this vetting process takes time, companies are required to inform their respective exchanges in advance. Nasdaq requires that these notifications take place via its web form (Nasdaq electronic disclosure), while the NYSE requires notification by phone and email, with the following specific requirements noted for each:

For Nasdaq-listed companies:

Under Rule 5250 (b) (1) –

“Except in unusual circumstances, a Nasdaq-listed Company shall make prompt disclosure to the public through any Regulation FD compliant method (or combination of methods) of disclosure of any material information that would reasonably be expected to affect the value of its securities or influence investors’ decisions. The Company shall, prior to the release of the information, provide notice of such disclosure to Nasdaq’s MarketWatch Department at least ten minutes prior to public announcement if the information involves any of the events set forth in IM-5250-1 and the public release of the material information is made between 7:00 a.m. to 8:00 p.m. ET.”

“If the public release of the material information is made outside the hours of 7:00 a.m. to 8:00 p.m. ET, Nasdaq Companies must notify MarketWatch of the material information prior to 6:50 a.m. ET.”

For NYSE-listed companies:

From: https://www.nyse.com/regulation/nyse:

“If issuing material news between the hours of 7:00 a.m. and 4:00 p.m., listed companies are required to call the NYSE’s Market Watch & Proxy Compliance team at least ten minutes in advance of issuance and a copy of the press release or other Reg-FD compliant method must be submitted via email to nysealert@nyse.com.”

Who makes the decision to halt trading in a stock?

The simple answer is… the exchange. In practice, however, when a member of a Market Watch team receives notification of impending material news, they reach out to the issuing company to best understand its importance and potential impact.

While a biotech’s executives can request a halt and attempt to sway an outcome, the final decision rests with the exchange.

What does all of this mean in practice?

• It means that generally, biotechs choose to issue their press releases either pre-market or post-market. Seldom do they do so during market hours – unless perhaps forced to do so by the timing of a presentation at a scientific conference (which are typically embargoed and made public at atypical market hours, and sometimes even on weekends).
• Next, regardless of whether a company believes a press release is material or not, and regardless of when it is issued, best practice is to always inform Nasdaq or the NYSE anyway.

(Side note – a former colleague of mine was once contacted by Nasdaq asking why a certain press release had been issued without prior notification. When my colleague explained the release was not material, Nasdaq’s Market Watch representative stated, “We will be the arbiters of whether a press release is material or not.”) (Second side note: failure to provide an exchange with advance notice of company-issued material news, can result in significant fines, commensurate with the impact and disruption of the news on trading activity.)

• It’s also important to note that, in practice, exchanges do not require the absolute final version of a press release to be shared with them. A press release that is materially the same as the final version is sufficient for the Market Watch teams at Nasdaq and the NYSE to determine if a news item warrants a trading halt. Many companies tie themselves in knots by delaying notification (as last-minute edits filter through to a final version), whereas in practice this can be avoided by notifying an exchange with a near-final version of a press release.
• In summary then, news-related trading halts for biotechs are few and far between, in spite of the large price swings associated with the vertical.