Difference Between Bulk And Block Deal: There are millions of transactions that are executed by the participants in the marketplace like the stock market itself.
Apart from the retailer investors, there are big institutions such as banks, mutual funds, hedge funds, pension funds, foreign institutional investors (FIIs), high net-worth individuals (HNIs), corporate promoters, and so on.
These institutional investors and high net-worth individuals have a huge amount of capital and an in-depth knowledge of companies which the retail investors do not possess. Due to this, their trading habits differ from those of ordinary investors.
These investors generally invest this large amount of money through two types of deals, namely Block deals and bulk deals. In this article, we will be discussing the difference between bulk and block deal
What Are Block Deals?
A block deal is referred to as a single trade that has a quantity of more than 5 lakh shares or whose traded value of Rs.10 crores. The minimum value for a block deal used to be0 Rs 5 crores which have been hiked to Rs. 10 crores by the Securities and Exchange Board of India (SEBI).
There is a special trading window called the block deal window during which the block deals will be executed. As the block deals in the stock market occur during a different trading widow, these deals will not be visible to the retail investors. Even the volumes of the block deals will not appear on the volume charts of the trading platforms.
The following are some of the rules that govern block deals:
- As the block deals cannot be executed during regular trading hours, they need to be executed only during a special trading window called the block deal window. These trading windows are functional for two shifts of 15 minutes each:
-The Morning trading window is open from 8:45 AM to 9:00 AM.
-The Afternoon trading window is open from 2:05 PM to 2:20 PM
- Block transactions are carried out in accordance with Block Reference Pricing. Orders can only be placed at a price that is 1% (+ or -) of the Block Reference Price. The calculation of the Block Preference Price is different for the two trading windows.
The price for the morning trading window is based on the previous day’s closing price. The price for the afternoon is based on the volume-weighted average price of the particular stock between 1:45 to 2:00 PM
- The block deal orders that are not matched will be canceled and will not be carried forward to the next trading window. In other words, the block deal order that goes unmatched in the morning trading window will be carried forward into the afternoon trading window.
What Are Bulk Deals?
Bulk deals are orders that involve at least 0.5% of the total listed shares of a company under a single client code that can occur in single or multiple transactions. These deals can occur within normal trading hours and are visible to all the participants in the market.
The following are prerequisites for a trade to be a bulk deal:
- The order must consist of at least 0.5% of the total number of equity shares of a company listed on the exchange in form of buy or sell orders.
- The broker affecting the bulk deal needs to inform the exchange about the details of the bulk deal such as the transaction amounts, the participant’s identity, etc. The broker has to immediately notify the exchange if the bulk deal comprises a single trade transaction.
If the bulk transaction comprises multiple transactions, the broker must notify the exchange within one hour of the trading closing.
- The trade that is executed must be in delivery and can not be squared off or reversed.
- According to SEBI, optimal trading and settlement operations along with monitoring and risk regulation procedures applicable to common trading activities, are also relevant and shown in trading windows.
- The exchange has to disclose the complete information about the bulk deal to the public on the same day the bulk deal has been implemented.
The Impact Of Bulk Deals And Block Deals On Prices
Bulk and block transactions might indicate increasing or decreasing interest in a certain stock. To make a trading choice, these signals must be carefully processed and linked with other trends and indicators.
The mere execution of a bulk or block order does not necessarily imply that a specific stock will move in the direction of the bulk trade.
However, a repeated bulk or block order in a particular direction (buy or sell orders) may indicate interest in the particular stock.
Difference between bulk and block deal
|Single trade that has a quantity of more than 5 lakh shares or whose traded value of Rs.10 crores
|Total orders that involve at least 0.5% of the total listed shares of a company under a single client
|2 separate trading windows
|Trades occur within the normal trading hours
|Morning: 8:45 to 9:00 AMAfternoon: 2:05 to 2:20 PM
|9:15 AM to 3:30 PM
|No of transactions
|Should occur in one transaction
|This can occur in multiple transactions in a day
|Must be within the 1% (+,-) range of the previous day’s closing price, or VWAP
|Can take place at the current market price.
In this article, we discussed the meaning of block and bulk deals, their impact on stocks, and the difference between bulk and block deal.
Data on bulk and block deals can be used by individuals as one set of indications in their trading strategy because they can suggest huge cooperative interests in the direction of the trade.
However, individuals should not solely rely on these deals for the purpose of trading as the information may not work every time as expected by individuals.
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