bLOCK DeaL

[ROHAN KACHALIA]

What is a block deal?

A block deal is a deal between two parties who come together to trade in a particulat script i.e. one person buys the shares and the other sells those shares to the buyer. It is termed as a block deal because of the size of the deal & the amount of worth of transaction taken place.

So as per the SEBI a trade with a minimum quantity of five lakh shares or a minimum value of Rs 5 crore, executed through a single transaction through a separate window of the stock exchange constitutes a block deal.

Now why a sepearte window. Why not this deal be done in the manner which the traders or investors do?

The reason behind this is, the seperate window allows big trades to be done without violating the rules and guidelines by the SEBI. So a block deal can be done between 9.55 AM & 10.30 AM.

Now this block buying of shares should not be squared off the same day otherwise it cannot be a block deal and it violates the SEBI rules. So the block deal has to be carried forward the other day or it should be a delivery.

The transaction price of a share ranges from +1% to –1% of the previous days closing or the current market price. Also the stock exchanges are required to disclose the information on block deals.

The broker, who facilitates the trade, is required to reveal to the stock exchange about the bulk deals on a daily basis though data upload software (DUS).

Note: This is just an introduction on block deal. More information to follow soon. Keep watching this thread....