Have you ever picked up a financial newspaper or scanned through a business news channel? You’ll see and hear jargons not used in your daily life. However, regular traders know most of these terms by heart. As a potential trader, you should also know about Exchanges like BSE and NSE on which trades occur. On the exchanges, you will often hear the terms bulk deals and block deals. Let’s decode them in this article.
What is a bulk deal?
Let’s begin by understanding the definition of what is bulk deal in stock market.
A bulk deal in the stock market is one in which the total quantities of shared purchased or sold exceeds over 0.5 per cent of the equity shares of a company listed on the exchange. A market-driven deal, it occurs only when brokers provide a trading window during the regular trading hours.
Rules about bulk deal trading
Having explained what is bulk deal in share market, let’s understand the rules about bulk deals:
1. Brokers facilitating the trade are obligated to notify the particular exchange about the deal.
2. They must inform the exchange within an hour of the trading day’s closing, especially if the deals are done via a single transaction.
3. Brokers need to provide specific details about the deal such as the script bought or sold, the name of the client, the quantity or volume of shares bought or sold and the trade price.
4. Apart from sharing the information, brokers must also it public, after the trading hours close, on the same day of implementing the trade.
5. Bulk deals must mandatorily result in delivery. Buyers/sellers are also required to pay a Securities Transaction Tax (STT) on bulk orders.
What is a block deal?
Now that we know what is bulk deal let’s understand what is block deal in stock market, starting with the definition.
A block deal is defined as a trade wherein more than 500,000 shares or shares worth a value exceeding Rs. 5 Crores, of a particular company listed on the exchange, are traded. Block deals may only be conducted during a particular trading window in the early trading hours. As such, the deal must go through between 9.15 AM and 9.50 AM, i.e. the time when the trading window is open.
Rules about trading block deals
After covering the definition of what is block deal in share market, let’s understand the rules.
1. Block deals may be done in the price range of +1 per cent to -1 per cent of either the current market price or the closing price of the previous day.
2. Like with bulk deals, brokers entering into block deal trades must notify the exchange providing details such as the script name, volume and quantity of stocks bought or sold and the client’s name and the trade price.
3. Such a deal can occur only when both parties agree upon buying or selling shares at a predetermined price.
4. If the deal must be traded, the rate and quantity of shares must exactly match the opposite block order.
5. Block deals must be fully traded mandatorily, failing which the trade is deemed cancelled.
6. The deal remains in the trading system (on online trading platforms) for only 90 seconds after which it is cancelled for non-execution.
Final note: In the case of both bulk and block deals, the number of buyers are limited since not many investors choose to trade in large quantities. If you wish to trade in blocks or bulk, reach out to an Angel One advisor for the necessary guidance.