Most of the time, the stock market is in constant motion. Millions of trades can go through in an hour, and millions of traders participate. When the market freezes, trading stops. When a trader's account is frozen, she's shut out until her account is thawed out. There are multiple reasons an account, or a stock exchange, might be frozen.
The market stays busy as long as some people are eager to buy and others are ready to sell. Some market freezes take place because nobody has the knowledge to trade successfully. For example, one French bank froze withdrawals from three of its investment funds in 2007. The bank said that because of a lack of liquidity in the U.S. market, there hadn't been enough trades in the fund's securities to calculate how much they were currently worth. That made it hard to set the value of withdrawals.
Sometimes markets freeze up because of technical problems. The Nasdaq stock market froze in 1987 for 82 minutes because of a power failure that shut down its main computer. In August 2013, a "flash freeze" stopped trading on the exchange for three hours. Nasdaq's statement says a problem distributing stock-price quotes froze trading for 30 minutes. It took another couple of hours before the Nasdaq staff had everything in place to resume trading.
Pump and Dump
A freeze on an individual account usually means trouble. In 2006, for instance, the Securities and Exchange Commission froze a Russian investor's accounts, along with those of his company. The SEC charged that the man had hacked other investors' accounts, using them to put in overpriced bids for stocks he owned. That pumped up the price, after which he dumped the stocks at a high profit. The unwitting buyers then saw their new shares plummet back to their real value.
Insider trading -- buying or selling with knowledge not available to the public -- is another way investors end up with accounts frozen. In 2013, the SEC froze a trading account with Goldman Sachs that bought up shares of H.J. Heinz just before an investment group announced it was buying the company. The announcement sent share prices soaring. SEC said it suspected insider trading as the timing of the large Heinz stock purchase indicated someone knew the announcement was coming.
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