SEBI is planning to review and possibly change the current rules for block deals in the stock market.
A special working group has been formed to look into the existing regulations. Two people familiar with the matter shared this update.
The group has been asked to examine key issues and gather feedback from mutual funds, brokers, investment bankers, and other market players. It will focus on five main areas:
1. Minimum Deal Size
At present, the minimum size for a block deal is ₹10 crore or 5 lakh shares. This limit was set in 2017.
SEBI is now asking market participants whether this limit should be increased, given the growth and depth of the Indian equity market.
2. Flexibility in Price Bands
Currently, block deals must be done within a price band of plus-minus 1% of the reference price. SEBI is considering widening this band to plus-minus 2%.
This change is being considered especially for mid-cap and small-cap stocks, where enough shares are often not available within the current price range.
3. Adjustment in VWAP Time Window
For the afternoon session, the reference price is calculated using the Volume Weighted Average Price (VWAP) between 1:45 PM and 2:00 PM.
The deal price is then set using the VWAP from 2:00 PM to 2:05 PM. The working group is exploring whether increasing this time window to 30 minutes could help bring more stability and reduce price swings.
4. Different Price Bands for Morning and Afternoon Sessions
SEBI is also thinking about using separate price bands for morning and afternoon block deal sessions.
Currently, a uniform price band of plus-minus 1% is applied to both. Market participants have asked for more flexibility in this area.
5. Review of Block Deal Time Windows
Block deals currently happen in two fixed time windows—one from 8:45 AM to 9:00 AM, and another from 2:05 PM to 2:20 PM.
SEBI is reviewing whether these timings are adequate. It has also proposed adding a third window from 3:30 PM to 3:45 PM, during the closing auction session.
SEBI has not yet responded to emails regarding this proposal.
Block deals are usually carried out by large institutional investors such as mutual funds and insurance companies.
These deals are based on pre-arranged agreements between buyers and sellers and are conducted through a special window on the exchange.
SEBI has strict rules in place to prevent any price manipulation during these transactions.
