What is Bulk Deal & Block Deal

Did you ever pick up a financial newspaper? Or scanned through a business news channel. You will hear and see jargons that are not commonly used in daily life. Regular traders are familiar with most of these terms. You should be familiar with the NSE and BSE exchanges that trades take place. You will often see the terms bulk deals or block deals on the exchanges. Let's look at them in detail.

What's a bulk deal ?

Let's start by explaining what bulk deal is in the stock market.

Bulk deals in the stock exchange are those where the total number of shares purchased or sold is greater than 0.5% of the equity shares of a company that is listed on the exchange. It is a market-driven deal that occurs when brokers offer a trading window during regular trading hours.

Rules for bulk deal trading

Let's now understand what bulk deal is in sharemarket.

1. Brokers who facilitate trades are required to notify the exchange concerned about the transaction.

2. They must notify the exchange within one hour of the closing of trading, particularly if they are dealing via one transaction.

3. Brokers must provide details such as the script purchased or sold, client name, quantity of shares or traded, and trade price.

4. Brokers must not only share the information but also make it public after trading hours close on the day of executing the trade.

5. Bulk orders must result in delivery. Bulk orders must result in delivery. Buyers and sellers are required to pay Securities Transaction Tax (STT).

What's a block deal ?

We now know what bulk deal is, let's learn what block deal is in stock market. Let's start with the definition.

A block deal refers to a trade that involves more than 500,000 shares, or shares with a value greater than Rs 5 crores. Block deals can only be done during the early hours of trading. The deal must be completed between 9.15 and 9.50 AM (i.e. The trading window opens at that time.

Rules about trading block deals

Let's now look at the rules after we have covered the definition of block deals in the share market.

1. Block deals can be made at a price range between +1 percent and -1 percent of the closing price of that day or the current market price.

2. Brokers who enter into bulk deals must inform the exchange, as with bulk trades, that they have provided details, such as script name, volume, quantity, client name, and trade price.

3. This type of deal is only possible if both parties agree to buy or sell shares at a certain price.

4. If the deal is to be traded, the price and number of shares must match exactly the block order opposite.

5. Block deals must be completed mandatorily. If not, the trade will be deemed cancelled.

6. The deal is valid for 90 seconds in the online trading platform's trading system. After that, it is cancelled to prevent execution.

Last note: The number of buyers for bulk and block transactions is limited because not many investors are willing to trade large amounts.