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What is Block Deal?

By: Akriti Tomar | Date : Jan 3, 25

Introduction

A block deal is a significant financial transaction involving a large volume of shares or securities exchanged between two parties outside the open market. These transactions typically exceed 0.5% of a company’s total outstanding shares and are usually executed through negotiated agreements.
A block deal refers to the buying or selling of a substantial quantity of securities in a single transaction. The minimum threshold for a block deal is either 5 lakh shares or shares worth at least Rs. 5 crores. These transactions are conducted off the exchange's central order book and are often negotiated between institutional investors, such as mutual funds, insurance companies, or banks. Block deals are reported to the stock exchange where the securities are listed and are generally carried out to meet specific investment objectives. These objectives may include altering exposure to a particular stock or sector.

Rules Governing Block Deal Trading

Both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have stringent rules and regulations for block deal trading. Below are some key rules:
  1. Eligible Securities: Block deals can only be executed in securities listed in the F&O (Futures and Options) segment or those included in the BSE 500 index. The securities must also have a market capitalization of at least Rs. 500 crore.
  2. Minimum Order Size: A block deal requires a minimum of 5 lakh shares or a transaction value of at least Rs. 5 crores.
  3. Trading Windows:
      • Morning session: 9:15 AM to 9:50 AM.
      • Afternoon session: 2:05 PM to 2:40 PM.
  4. Price Range: The block deal price must fall within a range specified by the exchange relative to the prevailing market price.
  5. Reporting and Disclosure: Block deals must be reported to the respective stock exchange and publicly disclosed within a stipulated timeframe.
  6. Penalties for Non-Compliance: Exchanges impose penalties for any violation of block deal trading regulations.

Difference between Block and Bulk Deals-

While block and bulk deals both involve large trades, there are distinct differences between the two:
  Aspect Block Deal Bulk Deal
Size Involves transactions exceeding 0.5% of the company’s total outstanding shares. Typically smaller than a block deal but still significant.
Execution Negotiated outside the open market. Executed through the regular trading process.
Reporting Must be reported to the exchange immediately after execution. Reported at the end of the trading day.
Purpose Often aimed at achieving specific investment goals, such as sector exposure adjustments. Can serve various purposes, including market-making and portfolio rebalancing.
 
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