The Securities & Exchange Board of India (Sebi) has proposed to increase the existing framework of block deals with their size and a higher price range being the key changes.
In a consultation paper on Friday, the markets regulator said that the minimum order size for execution of trades in the block deal windows shall be Rs 25 crores compared to Rs 10 crore. In addition, for non-F&O stocks, it has also proposed a wider band of the price of 3% from the previous close from the current 1%. For stocks traded in the F&O market, the price band of 1% remains.
Prakarsh Gadgani, CEO of Torus Digital and former CEO of 5Paisa said it is a fair proposal considering that the liquidity and volumes in the market have significantly gone up. “The price range for F&O stocks have remained the same because the liquidity is more so the impact cost is less,” he said.
What are block deals and why the changes?
Every trade executed in the block deal windows must result in delivery and shall not be squared off or reversed, the paper said. It noted that block deal is execution of large trades through a single transaction without putting either the buyer or seller in a disadvantageous position and for this purpose, stock exchanges are permitted to provide a separate trading window.
The regulator took into consideration feedback received from various stakeholders, recommendations of the working group, deliberations in Secondary Market Advisory Committee (SMAC) and subsequent internal deliberation.
Industry feedback and future outlook
This moves aligns with Sebi objective of improving the cash market. K Suresh, president of Association of National Exchange Members of India said the idea for increasing the size is that petty deals should come into the cash market to improve depth and liquidity. The industry also expects that going forward, Sebi also has plans to come with a separate framework for small and medium enterprises.
The regulator has asked for feedback on the paper by September 15.
