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Introduction
India’s securities regulator, the Securities and Exchange Board of India (SEBI), on 22 August 2025 published a consultation paper proposing sweeping changes to the framework governing “block deals” — those large pre-negotiated trades executed through special windows. The proposals include a higher minimum deal size, broader permissible price bands and revised reference-price windows. These moves aim to streamline big-volume trades, enhance transparency and mitigate potential manipulation in India’s equity markets.
Background / Context
Block deals constitute a mechanism by which
large institutional or promoter-led trades are executed in a way that tries to
minimise market disruption and preserve the interests of both buyer and seller.
As explained by market-commentary, a block deal is “the execution of large
trades through a single transaction without putting either the buyer or seller
in a disadvantageous position”.
In India, SEBI introduced specially defined
“block deal windows” on recognised stock exchanges — short trading slots
reserved for these large trades under defined rules around price bands,
reference prices and trade size. These windows are typically outside or at the
margins of the normal open market where flows of smaller investors dominate.
For example, the current threshold for a trade to qualify as a block deal has
stood at ₹10 crore (or about USD
1.2 million at current rates) since the last major amendment in 2017.
The reason for such a separate regime is
two-fold:
·
Large trades if executed straight in the open
market may dislocate prices, cause undue volatility or disadvantage one
counterparty.
·
Pre-negotiated block trades allow institutional
investors (e.g., mutual funds, insurance companies, foreign institutional
investors) to favour efficient execution while maintaining fairness and
regulatory oversight.
However, over the past decade the Indian
domestic equity market has grown significantly in size, breadth and
sophistication. Institutional flows have increased, and the benchmark indices
have risen several-fold — meaning that the original thresholds and conditions
for block deals may no longer reflect market realities.
Accordingly, SEBI appointed a working group
and sought feedback from market participants to review the block-deal
framework. The objective: ensure the mechanism remains fit for purpose,
strengthens market integrity and channels smaller trades into regular trading
windows, thereby improving liquidity and depth in the open market.
Why this matters: Transparency, fairness and market stability are foundational for a healthy securities market. With large trades being concentrated through these special windows, any flaws (narrow price bands, low size thresholds, lax delivery terms) can increase the risk of price manipulation, adverse investor impact or unintended market distortions. The proposed framework seeks to address these risks.
Detailed Explanation of the News
Below we unpack the key elements of SEBI’s
draft circular and consultation paper (August 2025) that seeks to revisit the
block-deal framework.
Minimum Order Size (Threshold)
·
Under the current regime, the minimum trade size
to qualify as a block deal is ₹10 crore.
·
SEBI proposes to raise that threshold to ₹25 crore. The rationale: Data shows that in FY 2025 a
large share of block deals were already above ₹14 crore, ₹26 crore, ₹50 crore
etc., implying the ₹10 crore threshold was too low relative to market size.
·
Effect: Smaller trades (below the new threshold)
would be executed in the normal cash market, reserving the block deal window
for genuinely large volume institutional trades.
Price Bands and Reference Price Mechanism
·
Currently, for block deals, trades must be
executed within a narrow band — typically ±1 % around the reference price.
·
SEBI’s proposal:
o For
non-F&O (Futures & Options) stocks: widen to ±3 % around the reference
price.
o For
F&O stocks: retain the ±1 % band (given higher liquidity and more dynamic
derivatives exposures).
·
Reference Price & Trading Window:
o Two
windows will continue: • Morning window from 8:45 a.m. to 9:00 a.m. IST (reference price = previous
day’s closing price) • Afternoon window from 2:05 p.m. to 2:20 p.m. IST (reference price = volume-weighted
average price (VWAP) of cash trades between 1:30 p.m. and 2:00 p.m.)
·
All trades executed in block deal windows must
result in delivery of shares and
cannot be squared-off or reversed.
Other Structural Enhancements
·
A unified reference price duration is proposed
(30 minutes) for both windows, improving consistency and reducing execution
risk.
·
Greater transparency: exchanges may be asked to
disseminate details such as scrip name, client name, quantity and price of
block deals after market hours.
·
Consultation deadline: market participants
invited to submit feedback by 15 September 2025.
“The working group was of the view that raising the order size limit would ensure participation mainly from serious institutional investors, not high-net-worth individuals or family offices.”
Impact Analysis
The proposed changes to the block-deal
framework have wide-ranging implications for different stakeholders:
institutions, businesses, auditors, tax professionals and even retail
investors.
Who stands to benefit?
·
Large
institutional investors (mutual funds, pension funds, insurance
companies): The higher size threshold and broader price band may allow more
flexibility in negotiating large trades via block windows with reduced
price-impact risk.
·
Promoters
and large shareholders seeking to offload or restructure equity
holdings: The stricter delivery requirement and clearer reference-price
mechanism provide a more stable environment to transact large blocks without
unduly disrupting the market.
·
Market as
a whole: By channeling smaller trades away from the block window into
the normal market, liquidity and depth of the everyday cash segment may
improve, benefitting retail investors indirectly.
Who may face challenges / lose out?
·
Mid-sized
investors or high-net-worth individuals currently executing deals of
say ₹10–25 crore via block windows may lose access; they will now have to
transact via normal market mechanisms, possibly affecting anonymity or
execution price.
·
Auditors,
chartered accountants and compliance professionals will need to advise
clients of the changed thresholds, ensure trades comply with the new rules, and
update documentation/ disclosures accordingly.
·
Companies
with lower liquidity or smaller-cap stocks might find the expanded
price band increases execution risk for large trades; counterparts may demand
wider discounts or premium given the broader ±3% range.
Practical implications for businesses,
taxpayers and auditors
·
Businesses
listed on exchange: If a company’s promoter or large shareholder plans
block exits or share transfers, they must structure transactions keeping in
mind the new minimum threshold, the delivery-only clause, and price-band
constraints. Failure to do so may lead to execution outside block deal window,
higher impact cost and reputational risk.
·
Taxpayers
(especially institutional investors): Large trades executed through block deal
windows will continue to have tax implications (capital gains, stamp duty,
settlement charges) as before, but the changed mechanism means planning must
incorporate the narrower window times and size constraints.
·
Auditors /
CAs: Advisory work will include: (i) verifying that proposed block
deal qualifies under the modified regime, (ii) confirming that delivery
obligation is honoured and trade is not squared-off, (iii) reviewing disclosure
by exchanges and company/regulator filings, (iv) alerting clients on shift to
normal market trades for smaller size deals.
·
Market
intermediaries (brokers, merchant bankers, exchanges): Systems need
update for the revised thresholds, price-band checks, trade window timings,
client eligibility and reporting requirements. They’ll also need to guide
clients on whether a planned deal falls within the block deal framework or
needs to be executed differently.
·
Regulatory
compliance & audit trail: Larger trades will attract attention; to
avoid being challenged for price manipulation or unfair trading, parties must
maintain clear documentation of negotiations, reference price computations,
execution in window and delivery settlement.
Overall, the proposed changes reflect a tightening of criteria to ensure block deals remain a “large-institution only” mechanism and do not become a vehicle for smaller speculative trades under the guise of block execution.
Common Misunderstandings
·
“Block deal
means any large trade of shares” — No. A block deal specifically refers to
a single large transaction executed in a
designated trading window under prescribed rules (price band, delivery
obligation).
·
“If I trade
via normal window, I can still get the benefits of block deal rules” — No.
Trades executed outside the block deal window (e.g., through normal market
hours) may not enjoy the negotiated price benefits or anonymity that block deal
windows offer.
·
“The price
band is fixed for all stocks” — Actually, under the proposed regime the
price band differs: ±1% for stocks in F&O segment; ±3% for non-F&O
stocks.
·
“The minimum
size cannot be changed frequently” — The threshold was last revised in
2017; given rapid market growth, SEBI is now proposing to raise it to ₹25 crore
(from ₹10 crore).
· “Block deals are always lower cost than normal trades” — Not necessarily. While block deals provide execution efficiency and help manage market impact, the broader price band or narrow time window could increase execution risk or cost if counterparties demand higher discount or premium.
Expert Commentary
With over two decades covering India’s
securities markets and taxation landscape, I observe that SEBI’s current review
of block-deal norms is both timely and necessary. The market today is far more
advanced than the last review in 2017 — index levels are multiples higher,
volumes and institutional participation have grown, and global best-practices
around transparency and execution risk have advanced.
The increase in minimum order size to ₹25
crore signals that SEBI intends to reserve the block-deal route exclusively for
true large-volume transactions, thereby segregating them from regular market
flows. This should improve the efficiency of the broader cash market by
shifting smaller trades back into the open order book, enhancing liquidity and
price-discovery.
Equally, widening the price bands for
non-F&O stocks to ±3% provides flexibility — institutional buyers and
sellers negotiating a block often require a premium or discount relative to the
prevailing price; a ±1% band was restrictive in today’s environment.
That said, execution risk remains: the
trading windows are short (15 minutes twice a day), and requiring delivery only
means parties must align settlement logistics. The risk is that if a deal fails
to match or execute in time, it may revert to the normal market with less
favourable terms.
From a tax, audit and compliance standpoint,
firms must now review their protocols: Are their planned trades above the new
threshold? Will they execute via block window or regular market? Have they
factored in the revised reference price and time-window mechanics? Good
execution will hinge on these details.
In short, SEBI’s reform moves aim to make big trades simpler and fairer — but they also demand higher operational discipline and planning from market participants.
Conclusion / Action Steps
The proposed amendments to the block-deal
framework by SEBI represent a significant evolution of India’s equity market
architecture. By increasing the threshold, broadening price bands and
reinforcing delivery-only execution, the regulator is seeking to strike a
balance: facilitating large institutional trades while promoting market
transparency and mitigating potential abuses.
For market participants the key action-steps
now are:
·
Review whether your planned trade falls above
the new ₹25 crore threshold (or whatever the final figure turns out to be).
·
Decide whether to transact via the block-deal
window or through the regular market — factoring in execution window timings (8:45-9:00
am and 2:05-2:20 pm IST) and the applicable reference-price formula.
·
Prepare for the delivery-only requirement and
ensure settlement/clearing systems are aligned accordingly.
·
Update internal compliance protocols — including
disclosures, documentation of negotiation, settlement planning and audit trail.
·
Engage with stakeholders (institutional
counterparties, brokers, exchanges) to negotiate favourable terms within the
new price-band constraints (±3% for non-F&O stocks).
·
Monitor the public consultation process: SEBI
has invited feedback by 15 September 2025; the final circular will set the
effective date (likely 30-60 days thereafter).
Looking ahead, one might expect further refinement: perhaps separate regimes for SME-listed companies, bigger windows, or an “OFS-like” alternative for non-promoter exits as highlighted in the working-group discussions. For now, market participants must align with the evolving framework — ensuring that large trades remain efficient, fair and compliant in India’s dynamic capital markets.
FAQs
Q1:
What exactly is a block deal?
A block deal is a pre-negotiated transaction in listed shares executed as a
single trade between a buyer and seller, typically through a special trading
window on stock exchanges, structured to minimise market impact and guarantee
delivery of securities.
Q2:
Why is SEBI revising the block-deal framework now?
Because since the last major revision in 2017, the Indian equity market has
grown significantly in size, liquidity and institutional participation. Data
show most block deals in FY25 were already well above the existing threshold,
implying the regime needed updating to stay relevant, efficient and
transparent.
Q3:
What are the key changes proposed?
The draft proposals include:
·
Raising minimum size threshold from ₹10 crore to
₹25 crore.
·
Widening price band for non-F&O stocks to
±3% around reference price; retaining ±1% for F&O stocks.
·
Maintaining two windows: 08:45-09:00 a.m. and
14:05-14:20 (2:05-2:20 pm) IST, with defined reference-price mechanisms.
·
Mandating delivery-only settlement (no squaring
off).
·
Greater transparency of trade details and
unified reference-price computation.
Q4:
How will this impact smaller institutional or HNI trades (below the new
threshold)?
Such trades will likely have to be routed through the normal cash market rather
than the block-deal window. This may reduce anonymity, increase execution risk
(price/impact) and require greater planning in order books rather than single
trades.
Q5:
When will the changes come into effect?
SEBI has invited feedback by 15 September 2025. Once finalised, the circular
will specify an effective date — historically around 30-60 days post-issuance. Market
participants should prepare in the interim.
References / Source Links
1.
“India’s markets regulator proposes changes to the
country’s block deal framework” – Reuters, 22 Aug 2025.
2.
“SEBI has proposed tweaking the reference price range
and increasing the minimum order size for block deals” – Moneycontrol, 22 Aug
2025.
3.
“SEBI Issues Draft Circular to Revise Block Deal
Framework” – Taxmann blog, 25 Aug 2025.
4.
“SEBI may raise minimum block deal size, widen
permissible price range” – Business Standard, 21 Aug 2025.
5. “Mutual funds are pushing for non-disclosure of block deals as SEBI reviews framework” – Moneycontrol, Aug 2025.