Alchemist, I must say, I'm really impressed with your in-depth knowledge of the market and it's characteristics.
I am always very curious to know the various intricacies of trading. Rather than make many small threads, I will try to fit a few questions into a single thread
-Could you tell me how 'Block Deals' take place, between whom, how the parties find each other, why are they preferred in favour of simply buying(or seling) from the market and does it necessarily mean a good sign for a share(since even though it shows that one person has a legitimate interest in the stock, there is also another person willing to sell it)?
-when I watch trading through the online terminal, I notice there is sometimes a huge buy(or sell) order, which immediately gets sold (or bought, as the case may be). (ie, say there is a share like Nagarjuna Fertilisers, where on average at a given price at a given point of time there are usually around 10000 to 30000 shares on order, but suddenly there appears on the buy order side, for example an order of 350000 shares and it immediately gets sold). Is this a bulk deal?
-Also, how is it that on a normal day for a stock (ie where there is no news affecting it), why is it that there can suddenly be a huge rise both in prices and volumes? I speculate that it must be the work of one big player buying a stock. But then I wonder why do both the buying AND SELLING volumes increase at the same time?
Sorry for the huge barrage of questions!!
I know that you really take a lot of trouble to answer everybody's posts and I still can't figure out how you do it with such unfailing regularity!!
Bulk deals are pre-decided by the two parties involved.
Sometimes the bulk (or block deals) are just matched orders. A buyer and seller enter similar orders.
e.g. A buyer puts an order to buy 10 lac shares @ Rs 100.
A seller puts an order to sell 10 lac shares @ Rs 100.
These orders are coordinated.
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Beyond a certain deal size, block deals have to follow a certain regulations.
NSE / BSE offers a separate window for block deals.
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The question is why there should there be a separate window?
The separate window reduces volatility and allows big trades without violating regulations.
e.g. Two FII's want to trade 10% of a company's shares. If they try to do this via the normal market, the exchange won't accept their orders. Such a big order would violate the client-wise position limit for the stock.
Thus the FII's can use the special window to trade these shares.
BSE's / NSE's block deal window works from 9:55 AM to 10:30 AM. You must have noticed most block deals on the exchanges take place early in the morning.
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For block deals, the trading members have to specify many other details like custodial participant's code.
This article gives some for details about bulk deals:
The concept of block deal was introduced to facilitate execution of large orders. Accordingly, stock exchanges were allowed to provide separate trading window for block deals.
The definition of bulk deals provided by the Securities and Exchange Board of India (Sebi) is as follows: 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.
After the implementation of regulations relating to bulk deals, the market regulator Sebi came out with guidelines pertaining to block deals in September 2005.
* A separate trading window would be kept open for a limited period of 35 minutes from the beginning of trading hours: 9.55 am to 10.30 am.
* Orders should be placed at a price not exceeding +1% from the ruling market price or previous day’s closing price.
* An order should be for a minimum quantity of five lakh shares or minimum value of Rs 5 crore.
* Every trade executed must result in delivery and shall not be squared off or reversed.
* Stock exchanges should disseminate the information on block deals to the general public on the same day after market hours. This should contain information bits like name of the scrip, name of the client, quantity of shares, traded price and so on.
Brokers need to disclose bulk deals transacted on BSE on a daily basis through DUS (data upload software). If it is a single trade, brokers need to inform immediately on execution of the order. They have to submit the required data on cumulative trades or multi-trades within one hour from the closure of the trading hours.
Bulk deals are pre-decided by the two parties involved.
Sometimes the bulk (or block deals) are just matched orders. A buyer and seller enter similar orders.
e.g. A buyer puts an order to buy 10 lac shares @ Rs 100.
A seller puts an order to sell 10 lac shares @ Rs 100.
These orders are coordinated.
=================================================
Beyond a certain deal size, block deals have to follow a certain regulations.
NSE / BSE offers a separate window for block deals.
=================================================
The question is why there should there be a separate window?
The separate window reduces volatility and allows big trades without violating regulations.
e.g. Two FII's want to trade 10% of a company's shares. If they try to do this via the normal market, the exchange won't accept their orders. Such a big order would violate the client-wise position limit for the stock.
Thus the FII's can use the special window to trade these shares.
BSE's / NSE's block deal window works from 9:55 AM to 10:30 AM. You must have noticed most block deals on the exchanges take place early in the morning.
=================================================
For block deals, the trading members have to specify many other details like custodial participant's code.
This article gives some for details about bulk deals:
Thanks a lot for all the information!
So, is it illegal for one party to buy or sell more than 0.5% of a company's listed shares in one day on the stock market.
Also, how can I use information on bulk deals to identify buying or selling opportunities, ie, what does a bulk deal say about a stock?
There is nothing illegal about selling or buying large quantity of shares.
Even 100% of a company's shares may be bought or sold in a single day.
Exchanges have limits to how much exposure a certain client and a certain member can have per stock.
Just like there is a limit to how much open interest there can be in a single stock futures, there is a limit on how much exposure an individual client or a trading member can have in a single stock.
I really don't bother about bulk deals data. For every bulk deal, there is a buyer who is bullish on the stock and there is a seller who is bearish on the stock. Thus the deal doesn't signify much.
-Also, how is it that on a normal day for a stock (ie where there is no news affecting it), why is it that there can suddenly be a huge rise both in prices and volumes? I speculate that it must be the work of one big player buying a stock. But then I wonder why do both the buying AND SELLING volumes increase at the same time?
I am myself intrigued by this kind of buying/selling. Any info on this? Anyone?
Is block deals gives any indication for the rise in share prices in coming days?
As I have mentioned earlier, in every deal, there is a buyer and a seller.
The buyer is bullish and seller is bearish (or not so bullish).
Thus a block deal does not mean much.
However, if a stratergic buyer is buying into a stock and is expected to bring his expertise/additional business to the company, it is a positive for the company.
It is important who is buying and who is selling.
It is not possible to have a general rule "block deals are good" or "block deals are bad".
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thanks alchemist for this wonderful piece of information.
in the coming days i may give more trouble to u becoz m making a project "online share trading system" and want to know many such information like block deals and all.
i would like to ask u that through a broker (consider a main broker) how many shares (quantity) order at a time of a particular company can we place at maximum?
i would like to ask u that through a broker (consider a main broker) how many shares (quantity) order at a time of a particular company can we place at maximum?
Firstly, I am not sure about the answer.
As far as I know, if the client has sufficient margin with the broker and the broker has sufficient margin with the exchange, there is no limit to how big the order can be. I guess the order cannot exceed the issue size of the company.
(For derivatives, exchanges have limits).
All large orders need a reconfirmation from the member.
Quote:
All orders with very large quantities will receive quantity alert at member terminal. Currently, if member entered any order exceeding the lowest of the quantity given below, result in an alert which will read as “Order entered exceeds alert quantity limit. Confirm availability of adequate capital to proceed” and only after the member clicks the button ‘Yes’ the order will be further processed for execution.
Quantity Freeze parameters:-
· 0.5% of the issue size of the security or
· value of the order is around Rs. 2.5 crore or
· a global alert quantity limit of more than 25000 irrespective of the issue size of the security, whichever is less.
Block Deals
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