A Sebi working group reviewing the block deal mechanism has proposed significant changes, including wider price bands, a higher minimum order size, and a common reference price for both morning and afternoon trade windows. These recommendations aim to make block deals more practical for institutional investors and align them with the growth in market size since the last rules were framed in 2017.
Wider Price Bands Suggested
The working group’s majority view is to allow a 5% price range in both directions for the morning block deal window and 3% for the afternoon window. However, the BSE has suggested a uniform 2% range for both sessions, cautioning that higher ranges could impact liquidity in continuous trading and trigger stop-loss orders.
Currently, the price band for block deals is only 1%, which many institutional investors find too restrictive. They argue the narrow range benefits high-frequency traders rather than long-term institutional players like mutual funds.
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No Additional Trading Window
The group recommended retaining the two existing block deal windows — from 8:45 to 9:00 am and 2:05 to 2:20 pm — citing that most trades happen in the first window. While some participants suggested hourly 10-minute windows, the majority felt additional windows were unnecessary at this stage.
Common Reference Price
Another unanimous recommendation was a common reference price for both trading windows. At present, the morning session uses the previous day’s closing VWAP, while the afternoon session uses VWAP from trades between 1:45 pm and 2:00 pm.
Higher Minimum Order Size
The group has proposed increasing the minimum order size for block deals from ₹10 crore to ₹25 crore, reflecting the growth in benchmark indices and market depth over the past decade. This move aims to ensure that only serious institutional investors participate in block deals, reducing participation from high-net-worth individuals who bypass the regular market.
Final Decision Rests with Sebi
The report was submitted to Sebi last week, and the regulator will now take a final call on the proposed changes. Industry experts believe these reforms could make block deals more efficient and transparent while protecting market stability.
Key Highlights:
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Wider price bands proposed: 5% morning, 3% afternoon.
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Common reference price for both windows.
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Minimum block deal size may rise to ₹25 crore.
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Two-window system likely to continue.
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