SEBI Proposes Block Deal Framework Revision

 To mitigate the risk of market manipulation, SEBI has proposed changes to the existing Block Deal framework under clause 1.2 of the master circular on “Stock Exchanges and Clearing Corporations.” A consultation paper outlining these revisions has been circulated for public comments.

Under the current framework, stock exchanges are permitted to offer two separate 15-minute trading windows each day for block deals—i.e., large trades executed through a single transaction without disadvantaging either the buyer or the seller. This mechanism, introduced in 2005 and last revised in 2017, enables pre-negotiated trades to take place at designated times under strict regulations designed to curb market abuse.

Under the proposed modifications, the minimum order size for trades executed through block deal windows will increase from ₹10 crore to ₹25 crore, reflecting the growth in market size and depth. This change aims to enhance liquidity and attract primarily serious institutional investors, rather than participants attempting to circumvent the main market via block deals. Additionally, the calculation window for the volume-weighted average price (VWAP) will be extended from 15 to 30 minutes—shifting from 1:45–2:00 PM to 1:30–2:00 PM—aligning it with the existing 30-minute morning trading window.

Further, the pricing mechanism has been bifurcated. For F&O-listed stocks, the price band remains unchanged at ±1% of the applicable reference price within each window. However, for non-derivative stocks, the permissible range has been expanded to ±3% of the applicable reference price, subject to applicable surveillance measures.

Moreover, the responsibility for implementing proper trading and settlement practices, as well as surveillance and risk containment measures, will now also extend to Clearing Corporations and Depositories, in addition to stock exchanges.

Earlier deliberations had considered additional measures such as differential price bands for the morning and afternoon windows and introducing a third block deal window during the Closing Auction Session (CAS) with a wider price band. However, these proposals have not been included in the consultation paper released for feedback.