The Securities and Exchange Board of India (SEBI) is considering a significant revision to the block deal framework in the stock markets, with proposals to raise the minimum order size for block deals to ₹25 crore. This move is seen as part of SEBI’s continuous efforts to enhance market transparency, reduce volatility, and streamline large-value share transactions.

What is a block deal?

A block deal refers to a large trade in shares, typically executed between two parties — a buyer and a seller — through a single transaction on the stock exchange. These trades are often carried out by institutional investors, mutual funds, banks, insurance companies, foreign portfolio investors (FPIs), and high net-worth individuals (HNIs). Since they involve high volumes of shares, SEBI regulates them to avoid market manipulation.

Currently, the minimum order size for a block deal stands at ₹10 crore. By increasing it to ₹25 crore, SEBI intends to ensure that only serious, high-value investors participate in such trades.

Why SEBI wants to revise the framework

The regulator believes that the present threshold may allow smaller, fragmented trades to enter the block deal window, which could sometimes create artificial price movements or short-term volatility. By setting a higher threshold, SEBI aims to:

• Enhance transparency in large share transactions.

• Minimise volatility in stock prices arising from smaller, speculative trades.

• Encourage institutional participation in block deals, ensuring healthier market practices.

• Improve the overall price discovery process for investors.

Expected benefits for the market

If the revised norms are approved, block deals will become more exclusive to institutional investors and large corporates. This will likely reduce the scope for price manipulation and lead to more stable trading environments. Market experts believe that while the number of block deals may reduce, the quality and reliability of such trades will improve.

Raising the threshold also aligns India with global practices, where block trades are typically restricted to large-value deals in order to avoid market distortion.

Industry reactions

Market analysts have welcomed SEBI’s proposal, noting that it would boost investor confidence and protect small investors from undue volatility caused by block deals of smaller sizes. However, some brokers and mid-sized investors feel that the higher threshold may limit their access to block deal windows, concentrating opportunities only among larger players.

Conclusion

The proposed revision in the block deal framework is another step by SEBI towards creating a fairer, more transparent, and efficient capital market ecosystem. While smaller participants may feel excluded, the long-term benefits in terms of stability, price discovery, and investor confidence could outweigh the challenges.

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