Introduction

Block and bulk deals are significant transactions that take place on stock exchanges. Block deals are executed through a special trading window that is not visible to all market participants, and they involve a large number of shares being bought or sold by institutional investors or large traders at an agreed-upon price.

On the other hand, bulk deals are conducted as part of normal trading and are visible to all market participants. These deals involve buying or selling many shares at the prevailing market price. Both block and bulk deals play a crucial role in the stock market ecosystem. Further, both could impact share prices and market sentiment. This blog covers both bulk deals and block deals in the context of the Indian share market.

What Are Bulk Deals?

In stock trading, bulk deals pertain to transactions involving a large volume of stocks executed through a stock exchange’s regular trading window. Typically, these deals entail purchasing or selling a significant number of shares and often involve multiple investors. The specific criteria used to classify a transaction as a bulk deal can vary based on the rules and regulations of different stock exchanges.

In some cases, a transaction must involve a minimum number of shares or meet a specific value threshold to be considered a bulk deal. The exchanges report and make public these transactions through their designated reporting mechanisms. This transparency allows market participants to access information about these large-volume stock transactions.

What Are Block Deals?

In block deals, many securities are bought or sold through an overall deal where at least 5 lakh shares or shares worth Rs 5 crore are part of the deal. These institutional investors bargain with each other to execute these deals in the main order book of the exchange. However, in 2017, SEBI (Securities and Exchange Board of India) upped it to Rs 10 crores.

The stock exchange where the shares are traded receives reports of these deals. Block deals, typically conducted to meet specific investment goals, serve as a strategic tool for adjusting exposure to a certain stock or sector.

Differences Between Bulk Deals And Block Deals (Bulk Deals vs Block Deals)

Particulars	Bulk Deals	Block Deals
Definition	The term bulk deal is used to describe the purchase or sale of a large portion of a company’s stock shares, often more than a set percentage threshold (0.5% of total shares).	Block deals are defined as the sale or purchase of a large quantity of shares ordinarily in a transaction of 5 lakh shares or more or of Rs. 10 crore or more.
Disclosure	The public is informed of the identities of buyers and sellers only after the transaction has been finalised.	The public receives immediate disclosure of the names of buyers and sellers once the transaction is completed.
Impact on Market	Bulk transactions might not significantly affect the stock price since they don’t involve a large percentage of the company’s shares.	Block transactions notably impact the stock price because they involve a substantial portion of the company’s shares, which could lead to price fluctuations.
Market Reaction	The market and traders are less likely to notice bulk deals quickly.	Market participants are more likely to pay attention to block deals, which can lead to higher trading activity and volatility.
Purpose	Specifically, bulk deals are commonly employed by retail and institutional investors for portfolio management or trading.	Block deals are typically utilized by institutional investors, such as mutual funds, to buy or sell a majority stake of a company.
Regulation	Stock exchanges and market regulators regulate Bulk deals.	Stock exchanges and market regulators regulate block deals but are subject to stricter rules and reporting requirements.
Reporting Requirements	The respective stock exchange must be notified or reported for bulk deals within a set time frame.	Block Deals must be reported to the stock exchange more promptly than Bulk Deals.
Transaction Size	Smaller in comparison to Block Deals.	Bigger when compared to Bulk Deals.

Rules Regarding Block Deals In India

It’s important to note that block trades can only occur in stocks that are part of the Futures and Options segment and have a market capitalisation of at least Rs 500 crore. This knowledge about the market cap requirement is crucial for understanding block trades.

It opens during the morning session trading for 35 minutes between 9:15 am and 9:50 am; again, it opens afternoon session trading for 35 minutes between 2:05 pm and 2:40 pm.

The price of the block trade is determined on an exchange basis and makes sure that the same falls within a particular range of the prevailing market price. Block deals are executed in securities, which form part of the BSE 500 index. Private equity funds, promoters, and global investment funds have participated in block trades.

Rules Regarding Bulk Deals In India

When brokers arrange large transactions between investors or institutions, they must inform the stock exchanges about the details of the transaction. This includes information about the participants, the amount of money involved, and the volume of shares involved.

If the value of the shares traded exceeds 0.5% and is more than Rs 10 crores, the deal can occur during block deal trading windows. In this case, the trader can execute the order during normal trading hours or in the block deal window. Investors wishing to keep their identities private during trading hours can place their order during the block deal window.

Impact Of Block And Bulk Deals On The Indian Share Market

Block deals are a trade in which a seller or buyer trades many securities in one go against a prior agreement over a price. Generally, these trades take place in separate windows of trading and do not influence the stock price in real- time. On the other hand, bulk deals occur during normal trading hours and are likely to reflect changes in stock prices in a real-time but not as strongly as in the case of block deals.

Frequently Asked Questions (FAQs)

Block deals are allowed in which segment?

Only in the cash segment, block deals are allowed.

Are the pending orders in the block deal viewed in the market watch?

No, the pending orders can’t be viewed in the market watch.

Are the order Level limits applicable for block deal orders?

All order-level limits such as Gross Buy, Gross Sell, Net Value, Single Order Quantity, & and Single Order Value Set from BOLT Admin terminal to Trader apply to block deal orders, similar to any other regular order.

What is the STT charge for a Block Deal in India?

STT (Securities Transaction Tax) will be applied to block deal transactions like delivery-based transactions.

If a member enters RRM, what will happen to the block deal order/s?

If a member goes into Risk Reduction Mode (RRM), all pending orders, including the block deal orders, will be returned and shown in the returned order window.

How do the bulk deals impact the market?

Bulk deals don’t influence the market as much as compared to Block deals.

Can retail investors get access to the Block deal window?

No, individual or retail investors can’t access the Block deal window.

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