Trades of a large no. of shares or high value of shares conducted on BSE/NSE are categorised as Bulk Deals/ Block Deals. These trades are different from the normal trades which are done on BSE/NSE as such trades involve huge volume to shares being traded or very high value of trades being conducted.
Such high value trades can be classified into Bulk Deals and Block Deals. The meaning of both these deals has been explained below.
What is a Bulk Deal?
A trade of more than 0.5% of the company’s equity shares traded in a single client code is called as a Bulk Deal. Such trades may be conducted in a single transaction or in multiple transactions and are conducted during the market trading hours itself.
The Broker who manages and implements the trade transaction is solely responsible for notifying about the bulk deals on a daily basis to a particular exchange. It is the responsibility of the broker conducting the transaction to inform the stock exchange about the fact that such a high value/volume trade has been conducted.
If such a trade has been conducted through a single transaction, the share broker shall inform BSE/NSE immediately about the fact that such a transaction has been conducted. If the deal has been conducted through multiple transactions, the broker shall notify the exchange about such a bulk deal within 1 hour from the close of the trading day.
After such a bulk trade has been conducted, the broker is required to inform NSE/BSE about the following:-
- Name of the Scrip
- Name of the Client
- Quantity of Shares bought/sold
- Traded Price
After receipt of such information about the Bulk Deal by the Stock Exchange i.e. BSE/NSE, the Stock Exchange is required to make such information public and disclose all details about the bulk deal transaction in the public after the closure of trading hours on the same day as the implementation of the trade.
A bulk trade is conducted in the normal trading hours itself and is visible to everyone in the normal trading window. All bulk trades must necessarily result in Delivery and cannot be squared off during the day. STT is also charged on such orders in the same manner as charged on all other orders.
The details of all Bulk Deals conducted on BSE and NSE on any given day are mentioned on the following links:-
- Bulk Deals on BSE
- Bulk Deals on NSE
What is Block Deal?
A trade of more than 5 Lakh shares or of a value of more than Rs. 5 Crores of a company is called as a Block Deal.
Block Deal trades can only be conducted in a special trading window which is opened from 9:15 AM to 9:50 AM. The price at which such trades can be conducted is in the range of +1% to -1% of the current market price/ previous day’s closing price as applicable.
It is the responsibility of the broker conducting such a trade to immediately inform the stock exchange i.e. BSE/NSE (as the case may be) about the fact that such a transaction has been conducted on the exchange. The following details regarding the Block Deal are required to be intimated by the broker to the stock exchange:-
- Name of the Scrip
- Name of the Buyer/Seller
- Quantity of Shares bought/sold
- Traded price
After the receipt of such information regarding the Block Deal, the exchange shall make such information public on the same day on which the trade has been conducted. Such block deal trades must always result in delivery and cannot be squared off during the day. STT is also charged on such orders in the same manner as charged on all other orders.
Matching of orders in a Block Deal
Block deals are always conducted in a special trading window which is opened for a period of 35 minutes before the start of the normal trading hours. Moreover, the no. of buyers/sellers is also very limited as there are very few investors who buy/sell such high value/volume of shares.
For a block deal to get traded, the quantity and the rate should be exactly the same as the opposite side block order deal. Block deal orders will be matched against the counter order with the same quantity and rate on a time priority basis.
A Block deal cannot be partially traded and if not traded fully the order will get cancelled. The block deal order remains in the system only for a period of 90 seconds after which it automatically gets cancelled if it remains unexecuted.
- Client ABC enters buy block deal order of 7 Lakh shares @ Rs. 80
- Client XYZ enters sell block deal order of 7 Lakh shares @ Rs. 80
In the above case, the buy block deal order will get matched with the sell block deal order as the quantity and the rate of both the orders is the same.
- Client ABC enters buy block deal order of 20 Lakh shares @ Rs. 100
- Client XYZ enters sell block deal order of 10 Lakh shares @ Rs. 100
- Client PQR enters sell block deal order of 10 Lakh shares @ Rs. 100
In the above mentioned case, the buy block deal order will not match with any of the sell block deal orders as the quantities do not match although the rate is the same. For the block deal order to get executed both the price and the quantity to be traded shall be exactly the same.
The details of all Block Deals conducted on BSE and NSE on any given day are mentioned on the following links:-
- Block Deals on BSE
- Block Deals on NSE
Difference between Block Deal and Bulk Deal
The difference between a Block Deal and a Bulk Deal has been summarised below
|Particulars||Bulk Deal||Block Deal|
|Meaning||Trade of more than 0.5% of Company’s shares||Trade of more than 5 Lakh shares or more than Rs. 5 Crores value of shares.|
|Trading Window||Can be conducted through Normal Trading Window.||Can only be conducted in the Special Trading Window.|
|Trading hours||Can be conducted anytime during the day||Can only be conducted from 9:15 AM to 9:50 AM.|
|Executed Price||Can be executed at any price.||Can only be executed at a price in the range of +1% to – 1% of the previous traded price.|
|Execution||Can be partially executed.||Cannot be partially executed.|
Reason for Introduction of Bulk Deals/ Block Deals
The reason for introduction of Bulk Deals and Block Deals by SEBI is to increase greater transparency in bulk/block deals and to prevent rumours and speculation. When the trading volumes in a stock increase, it creates all sorts of rumours including a potential sale by the promoter or an increased interested from the institutional investors.
Before these guidelines for disclosure of Bulk deals and Block deals was issued, such transactions were completed in secrecy. Apart from the parties involved i.e. the buyer and the seller, no information on block deals was available to retail investors and rumours about the size of the deal used to drive up the stock price on subsequent days.
The introduction of the Bulk Deals and Block Deals is therefore considered very good as it gives greater transparency and is basically meant to clarify and explain the reason for the increase in volumes.
Interpretation of such Bulk Deals and Block Deals
Such Block Deals and Bulk deals are usually done by FII’s, DII’s, Mutual Funds and in some cases by very high net worth individuals as well. Such block deals may not necessarily mean that the price is expected to go up or down.
However, in case of bulk deals happening on a continuous basis in a share, it could be a sign of big variance expected in the share price in the near future. Yet this could also happen in operator driven counters.
Blindly following the block deals and bulk deals information is not a good investment strategy. It is very difficult to predict the circumstances under which the buyer is buying/selling such shares.
Investors are advised not to blindly assume that the price will increase or decrease on the basis of such deals and investors are advised to look into the fundamentals of the company, its past performance, future plans etc before investing in any company.