"Frozen" has different meanings in relation to the stock market depending on context. As a general rules it means that buying and selling has temporarily ceased. This could affect individual traders, a particular stock, or the entire market.
Other People Are Reading
The term "frozen" can apply to margin trading. This is where brokers effectively lend money to clients to buy shares, meaning the client only puts some of the money up front. The client can then potentially make much larger profits (by dealing in a larger quantity of shares) than if he could only use his own money. If the share price falls, the client has to give extra cash to the stockbroker to protect against the possibility that the stock price will never recover and the client will be unable to repay the money he borrowed from the trader. Many stock markets have maintenance margin rules, meaning that the client has a set period to pay the extra cash after a stock price falls. If the client doesn't pay, the account is frozen and the client can't buy or sell any more shares until they pay the extra cash.
It is possible for the regulators of a stock market to freeze a particular stock, meaning trading in the stock is temporarily halted. This might happen if the regulators believe there is a possibility of illegal market manipulation. If a company is in severe financial difficulty and faces liquidation, the stock market might freeze trading indefinitely. This is usually better known as the stock being suspended. It can lead to the stock being delisted, meaning trading is permanently barred and the shares effectively become worthless.
In extreme conditions, an entire stock market can be frozen by officials. This is most likely to happen if serious technical difficulties mean traders can't get clear information on pricing or be certain of completing deals. A market could also be frozen if there is a widespread financial panic and prices of all stocks are collapsing.
The term "frozen" can apply colloquially to situations where there is no regulatory reason why trading can't happen, but few if any deals are being made. This is also termed a "lack of liquidity." The most common reason is that people don't have enough information to work out an asset's true value and are thus unwilling to buy or sell for risk of getting what turns out to be a bad price. This is less likely to happen with an ordinary company stock and more likely to happen with derivatives, which are assets whose value derives from other assets. For example, during the 2008 financial crisis traders became unwilling to buy securities that were based on pools of mortgages because they were unclear about the risk that those mortgages wouldn't be repaid.
- 20 of the funniest online reviews ever
- 14 Biggest lies people tell in online dating sites
- Hilarious things Google thinks you're trying to search for