How do block deals and bulk take place?


Quoting from Rediff, also explains difference between block and bulk, that most people think is the same. 

What is block deal?

According to Securities and Exchange Board of India a block deal is a single transaction of a minimum quantity of five lakh shares or a minimum value of Rs 5 crore and is done between two parties through a separate window of the stock exchange that is open for only 35 minutes in the beginning of the trading hours.

So in a block deal, the buyer and seller already know each other and have agreed on the trade. They come to the exchange and execute the order in this 35 min window. 

SEBI has also made it mandatory for the stock brokers to disclose on a daily basis the block deals made through DUS or Data Upload Software.

Difference between block deal and bulk deal

Unlike a block deal that happens through a separate window that is open for only 35 minutes in the beginning of the trading hours at the stock exchange, bulk deals happen all through the trading day. Another major difference is that a bulk deal is said to have happened if under a single client code and in a single or multiple transactions more than 0.5 per cent of a company's number of equity shares is traded.

Also, bulk deals are market driven while two parties are required for a block deal to take place. Bulk deals carried out for the day should be revealed by a broker on the same day to the stock exchange using the DUS.

Who can go for these deals?

Generally, only the institutional players including the foreign institutional investors are the major participants in this type of deals. This also includes mutual funds, the various financial institutions, and companies carrying out insurance business, banks, and venture capitalists. Sometimes, many promoters use this window to arrange the issues that are related to cross holdings. 

Statutory requirements that must be followed for block deals

SEBI has rules in place certain rules for carrying out block deals. It is mandatory that block deals should happen only through a separate window and for a period of 35 minutes only in the beginning of the trading hours. Also SEBI rules state that block deal orders should be placed for a price not exceeding +1 per cent to -1 per cent of the previous day's closing or the current market price. Delivery must be made for every trade executed and cannot be squared off or reversed. All details like the name of the scrip, the client's name, number of shares and traded price should be disclosed to the public through the DUS every day after market hours. 


Thanks @Nithin, learned many things…

Nice to know this, Thanks!

Thank You… But i want more…