What is Block Deal?

A Block deal is one in which the value transacted surpasses ₹ 10 crore and is defined as a single trade in which shares above the amount of 5,00,000 are traded. The Securities and Exchange Board of India (SEBI) modified the threshold for block deal value in 2017 to ₹ 10 crore. Block deals occur in the share market during a designated trading window called the block deal window. However, the value charts of any trading platform do not show these agreements. In this article, let’s learn about what is block deal, a block deal today as per the latest rules, and more.

Example of a Block Deal

Participants may choose to trade within the block window or on regular trading if the transaction value exceeds ₹25 crores and 1.5% of all the company's listed shares. To perform the trade in the trading window, participants can choose to keep deal information confidential until they are revealed to exchanges.  

Rules about Block Deal

Stock exchanges have specific rules governing large transactions. Let's explore the rules related to block deals today.

Block Deals

• The price range for block deals is either +/- 1% to -1% of the closing price of the previous day or the current market price.
• Brokers who engage in a block deal today must notify the exchange, just like they do with bulk deals, by submitting information about the trade. These include the identity of the customer, the script name, the volume and number of stocks acquired or sold, and the trade price.
• Block deals can take place only when both the buyers and sellers agree upon the price and quantity. These transactions can take place on different trading windows.
• The rate and number of shares must precisely match the opposite block if the deal is to be transacted.
• A trade is cancelled for non-execution after just 90 seconds of being in the trading system (on online trading platforms).

Benefits of Block Deals

Now that you understand what a block deal means, let’s take a look at the various advantages it offers. The following are some of the key benefits of block deals. 

• Increased Productivity: Big deals find expression through block trades without causing significant price movements.
• Indicative of Confidence: A good block trade is indicative of the hope investors have in the prospects of the company.
• Market Intelligence: Block trades furnish insightful information as regards institutional investor views.

Difference Between Bulk Deal vs Block Deal

Block Deals and Bulk Deals involve significant volumes of shares being traded.

Investors should be aware of how these transactions can impact stock prices.

Conclusion
A block deal is simply a large quantity of shares or other securities exchange that typically occurs as a result of negotiations, occurring outside the open market. Block deals are an essential entity in the stock market because they help in trading large numbers seamlessly, remove market volatility, and act as a source of liquidity. They allow the companies to undertake the process of raising money and institutional investors to trade very large volumes of shares at relatively low costs. Since these can have a very significant effect on stock prices, investors must be kept up-to-date about them. A stock market app would help the investor keep track of and analyze such deals to make better decisions.