Bulk and block deals done on exchanges are keenly watched by market participants daily as they
indicate the interest of big investors in a stock. Though these two terms sound similar, there is a
difference between them. Here's what they mean and how investors should interpret them
1. What is a block deal?
It is a transaction of a minimum quantity of 500,000 shares or a minimum value of Rs 5 crore
between two parties, wherein they agree to buy or sell shares at an a ..
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.
Effect on Share Price
Block deal is essentially a seller selling a large portion of the company's equity at a desired price and
at the same time a buyer entering a buy order for the same quantity at the same price. It may
increase the market price if the block deal is done at a higher price or it may drop the market price if
the price is lower than the market price. The amount of rise or drop depends on the floating stock
and what percentage of shares are getting traded as part of the block deal.
Block deals may have both positive and negative effects on the stock price. Normally, some brokers
come to a verbal agreement with the purchaser/seller to buy/sell the stock at a certain prefixed
price. So, the brokers starts manipulating the price to accumulate the stock keeping their targeted
margins. The stock then starts moving in a very narrow price range. After attaining the goal, the
broker transfers the stock to/from the intended purchaser/seller at the prefixed price. To do that,
the broker may manipulate the price for some days by adopting every type of wrong means. After
the deal, the stock price may rise or fall very fast and that momentum extends to few more sessions.
Read more at:
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about/article34892037.ece
India: SEBI Issues Operating Procedure
For Suspension And Revocation Of
Trading For Non Compliance With Listing
Regulations
Pursuant to the coming into force of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("Listing Regulations") on December 1, 2015, SEBI
issued a circular on November 30, 2015 ("SOP Circular") to set out a uniform structure for
imposition of fines and a standard operating procedure for suspension and revocation of
trading of specified securities, for non-compliance with the provisions of the Listing
Regulations. As per the SOP Circular, depositories on receipt of intimation from the
concerned stock exchange, of any non- compliance by a listed entity, can freeze or
unfreeze, as the case may be, the entire shareholding of promoters/ promoter group of such
listed companies which are non-compliant with the Listing Regulations ("Non-Compliant
Companies"). Stock exchanges will be required to disclose on their website the names and
the actions(s) taken against Non-Compliant Companies, along with relevant details.
To maintain consistency and uniformity of approach, the principles and procedures to be
followed by the stock exchanges for taking action(s) against Non-Compliant Companies
have been laid down. As a first resort, stock exchanges shall use imposition of fines in case
of such non compliances and invoke suspension of trading in case of subsequent and
consecutive defaults. Fines for non-compliance may range from ₹1,000 (Indian Rupees One
thousand) to ₹10,000 (Indian Rupees Ten thousand) or 0.1% (point one percent) of the paid
up capital, as the case may be, for each day of non-compliance of obligations under certain
regulations of the Listing Regulations. Stock exchanges will have the right to initiate
appropriate enforcement action, including prosecution, if Non-Compliant Companies fail to
pay the fine, for non- compliance, despite the receipt of notice.
The shareholding of the promoter/ promoter group can remain frozen for up to a period of 3
(three) months from the date of revocation of a suspension. Moreover, trading in the shares
of the Non-Compliant Company may be stopped completely if the entity remains non-
compliant for 6 (six) months. The SOP Circular provides for the procedure for notifying the
Non-Compliant Companies and criteria under which trading in the shares of the Non-
Compliant Companies can be suspended. The suspension of trading in the shares of a Non-
Compliant Company may be revoked in the event that the entity complies with the
requirements under the Listing Regulations and pays the applicable fine(s) within 3 (months)
from the date of such suspension. However, if the entity complies with the requirements and
pays the applicable fine(s) beyond the period of 3 (three) months, the suspension may be
revoked, while the trading in shares will be limited to a "trade for trade" basis for a period of
3 (three) months from the date of revocation.
The Listing Regulations were issued by SEBI to simplify and consolidate the procedure for
listing of securities on relevant stock exchanges. The mechanisms put in place by the SOP
Circular will ensure uniform approach by the stock exchanges for imposition of fines and
penalties for non- compliance with the Listing Regulations, thereby requiring timely
adherence of the Listing Regulations by listed entities.
The content of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.
