InvestorQ : How do bulk deals differ from block deals?
Dhwani Mehta made post

How do bulk deals differ from block deals?

Answer
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2 years ago


A bulk deal is a deal where the total quantity of shares bought or sold is greater than 0.5% of the share capital of the company. A bulk deal can be transacted either through the normal trading window or through the block trading window. Quite often, when a large FII or mutual fund or an HNI wants to buy a large block of shares in a particular stock, they prefer to use sliced trades through the day. This ensures that they get the best advantage of the volatility in the market and are able to reduce their overall cost of acquisition. Similarly in the case of bulk selling also, the sliced approach helps them get a better selling price. Bulk deals have to be reported to the exchange by the broker executing the trade. In case the bulk deal (exceeding 0.5% of the share capital) is executed through the block window then the trade has to be reported immediately to the exchange. In case of a sliced order through the day; if the total purchase or sale exceeds 0.5% of the share capital then the bulk deal has to be reported to the exchange within 1 hour of the close of trade.
Block deals, on the other hand, block execution of a minimum of 5 lakh shares or value of Rs.5 crore and done specifically through the Block Deal window of the stock exchanges. The block deal window is open for a period of 35 minutes after trading opens and any block trading executing on this window has to be reported to the exchange immediately by the broker and such a trade cannot be squared off intraday. HNIs, FIIs and mutual funds use the block window to execute large trades without the markets getting a whiff of it or even impacting the price. The risk is that if I am planning to buy 40 lakh shares of a stock, then the market gets to know about it based on the volumes and there may be a lot of front buying leading to a skewed rise in price. This can go against the buyers. This can be avoided by using the block trade window.