Block deals vs bulk deals: Key differences, timing and other key factor

Investors often read about block deals and bulk deals in news reports, and it could be confusing for many. While it could be a new concept for retail investors there is another section of investors who carry out bulk and block deals.

The stock markets witness the participation of investors across categories on a daily basis. While the retail investors mostly engage in regular stock trading, several large trades also happen by another section of investors who command a sizable wealth. Such investors like high net worth individuals, institutional investors, promoters and companies, buy or sell a large number of shares, which are known as block or bulk deals depending on the size of the trade.

Let’s delve deep to understand the key differences between bulk and block deals and other associated factors.

What is a bulk deal?

A bulk deal is a trade in which more than 0.5% of the total number of shares of any listed company are bought or sold on the stock exchange in a single trading session. As per the Securities Exchange Board of India (SEBI) guidelines, the quantitative limit of 0.5% of the scrip’s total shares can be reached through one or more transactions executed in one day of trading.

What is a block deal?

As per the SEBI norms, block deal refers to large trades though a single transaction of minimum order size of ₹10 crore. The block deals can only be executed within the specified times, known as block deal window, on the stock exchanges.

Bulk Deal vs Block Deal: What is the difference?

Block deals happen in a single transaction as opposed to bulk deals in which the trade can take place through multiple transactions. Bulk deals can take place during the normal trading hours, whereas block deals have special trading windows.

While bulk deals are trades involving the buying or selling of 0.5% of the total listed shares of any listed company, the minimum trading volume for the execution of a block deal is 5 lakh shares or trading value worth ₹10 crore and above.

Block deal timings

The SEBI guidelines lay out two trading windows for conducting block deals. The stock exchanges need to disseminate the information on block deals such as the name of the company, name of the client, quantity of shares bought/sold, traded price, etc. to the general public on the same day, after the market hours. Additionally every trade conducted in the block deal windows has to mandatorily result in delivery and cannot be squared off or reversed, according to SEBI.

Morning block deal window

The morning block deal window opens at 08:45 am and closes at 9:00 am. No other trades are conducted in this window. The trades conducted in this window use the previous day’s closing price as a reference for buying and selling shares, according to the SEBI norms.

Afternoon block deal window

The afternoon block deal window opens from 02:05 pm to 02:20 pm. The trades conducted in this window use the volume weighted average market price (VWAP) of the trades executed in the stock in the cash segment between 01:45 PM to 02:00 PM as the reference price. The exchanges calculate the VWAP from 2:00 pm to 02:05 pm and disseminate necessary information regarding the VWAP applicable for the execution of block deals in the afternoon block deal window.

Accordingly, orders are placed within the range of ±1% of the applicable reference price in the respective windows as stated above.

Conclusion

Block deals and bulk deals both provide opportunities to wealthy investors for participation in large trades. Investors should read and research all the details of block and bulk deals before participating in either of such deals and invest wisely.