Why Exchanges May Halt Trading During Unusual Price Activity

# When will a stock exchange suspend trading because of a short squeeze?


# When will a stock exchange suspend trading because of a short squeeze?












I don't completely understand why the NYSE suspended Piggly Wiggly Co., because I don't think the NYSE suspends stocks for short sellign in general? I boldened the key sentence below. Will the NYSE do the same for GameStop [GME] or other short squeezed stocks?

The original article printed this as a single paragraph, but I added paragraphs to make it more readable.

> The New Yorker, June 6, 1959 P. 128 ANNALS OF FINANCE about Clarence Saunders of Memphis, who in 1919, founded the Piggly Wiggly Stores, a chain of retail self-service markets situated mostly in the South & West, with headquarters in Memphis. Saunders is remembered on Wall St. as the last man who engineered a real corner in a nationally traded stock. By 1922 the stores had flourished so that its shares were listed on the N.Y. Stock Exchange.

> When a group of bears began selling Piggly Wiggly short to force the price of the stock down, Saunders began a buying campaign to support the price of the stock in order to protect his own investment & that of other Piggly Wiggly stockholders. He supplemented his own funds with a loan of about ten million dollars from a group of bankers. His buying campaign was an attempt at a corner. The stock went up wildly, reaching a high of 124. At this point the Exchange suspended further trading & postponed the short sellers' delivery deadline. This resulted in eventual bankruptcy for Saunders & he was finally forced to step out of the Piggly Wiggly Company.

> Saunders came back, however, In 1928 he started a new grocery chain called the Clarence Saunders, Sole Owner of My Name, Stores, Inc. The depression hit these stores in 1930, & they went bankrupt & he was broke again.

> After that he started another grocery chair, called the Kedoozle, an electrically operated store. It was found that the machinery was too complex & expensive to operate. In his last years Saunders was working on an even more intricate mechanism - the Foodelectric. It was unfinished when he died in 1953.

By the way, I know this author, John Brooks, wrote a 1969 book Business Adventures that discusses this the Piggly Wiggly market corner in the chapter "The Last Great Corner". But my library doesn't have it.

## Answer by Attack68 (score 3)

https://quant.stackexchange.com/a/60767

In general exchanges' business models rely on them being able to provide safe, transparent and liquid markets with the credibility of being trustworthy and honest.

Whilst I myself am very skeptical on the woolly definition that is 'spoofing' there are rules put in place that prevent this, and other kinds of market-manipulation such as insider-dealing.

When an exchange detects 'unusual activity' the typical reaction is to halt trading and investigate. I believe empirical studies have shown that halting a market (so called circuit breakers) have been effective in reducing volatility overall, not least because it sometimes gives operators a chance to reset the parameters on electronic algorithms.

If you detected excessive and extremely unusual activity in a share like GME, whose company fundamentals are unchanged in light of the recent 10x price increase, would you try to prevent this activity? I would. Nokia have even released a statement saying they do not know what is driving their share price, presumably in an effort to maintain some sort or professionalism and avoid becoming a meme stock that other fund managers avoid simply because the volatility becomes too great.

this question is relatively opinion based and should technically be closed