Description

SEBI modifies the Block Deal Framework introducing two trading windows (morning 08:45-09:00 AM and afternoon 02:05-02:20 PM) with INR 25 crore minimum order size and ±3% price range from reference prices.

Summary

SEBI has comprehensively revised the Block Deal Framework through Circular SEBI/HO/MRD/POD-III/CIR/P/2025/134 dated October 08, 2025. The revised framework introduces two distinct block deal trading windows with specific timings and reference pricing mechanisms. The morning window operates from 08:45 AM to 09:00 AM using previous day’s closing price as reference, while the afternoon window operates from 02:05 PM to 02:20 PM using VWAP calculated from 01:45 PM to 02:00 PM as reference. The minimum order size has been set at INR 25 crores with all trades requiring delivery. These changes aim to facilitate execution of large trades without disadvantaging buyers or sellers while maintaining market integrity.

Key Points

  • Two separate block deal windows introduced: Morning (08:45-09:00 AM) and Afternoon (02:05-02:20 PM)
  • Morning window reference price: Previous day closing price
  • Afternoon window reference price: VWAP of trades executed between 01:45 PM to 02:00 PM in cash segment
  • Price range restriction: ±3% of applicable reference price in respective windows
  • Minimum order size: INR 25 crores per transaction
  • All block deals must result in delivery and cannot be squared off or reversed
  • Stock exchanges to calculate and disseminate VWAP information between 02:00 PM to 02:05 PM for afternoon window
  • Block deal information (scrip name, client name, quantity, price) to be disseminated after market hours on same day
  • Provisions applicable to both T+1 and optional T+0 settlement cycles
  • Stock exchanges permitted to set trading hours between 08:45 AM to 05:00 PM

Regulatory Changes

Modified Provisions:

  • Paragraph 1.2 of Chapter 1 of SEBI Master Circular on Block Deal Framework has been modified
  • Paragraph 3.5 of SEBI Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/172 dated December 10, 2024 stands modified

New Framework Components:

  1. Dual Window Structure: Replaces previous block deal mechanism with two distinct windows having different reference pricing

  2. Reference Price Methodology:

    • Morning: Static reference (previous day close)
    • Afternoon: Dynamic reference (intraday VWAP)

  3. Enhanced Order Size: Minimum order size standardized at INR 25 crores across all block deal windows

  4. Price Band: Uniform ±3% price range applicable to both windows, subject to surveillance measures and existing price bands

  5. Delivery Mandate: Explicit requirement that every trade must result in delivery with prohibition on squaring off or reversal

  6. Extended Trading Hours: Stock exchanges may set trading hours in broader range (08:45 AM to 05:00 PM)

Compliance Requirements

For Stock Exchanges:

  • Implement separate trading windows for morning (08:45-09:00 AM) and afternoon (02:05-02:20 PM) block deals
  • Calculate VWAP between 02:00 PM to 02:05 PM based on trades from 01:45 PM to 02:00 PM
  • Disseminate VWAP and other necessary information before afternoon window opens
  • Ensure price range restrictions (±3% of reference price) are enforced
  • Verify minimum order size of INR 25 crores per transaction
  • Disseminate block deal details (scrip name, client name, quantity, price) to public after market hours on same day
  • Apply all trading and settlement practices from normal segment to block deal windows
  • Make necessary amendments to byelaws, rules and regulations
  • Notify market participants and investors about the provisions

For Clearing Corporations:

  • Implement appropriate settlement practices for block deal windows
  • Apply surveillance and risk containment measures equivalent to normal trading segment
  • Ensure delivery settlement for all block deal trades
  • Make necessary amendments to byelaws, rules and regulations

For Depositories:

  • Ensure appropriate settlement mechanisms for block deal trades
  • Support delivery-based settlement requirements
  • Make necessary amendments to byelaws, rules and regulations

For Market Participants:

  • Ensure all block deal orders meet minimum size requirement of INR 25 crores
  • Place orders within ±3% of applicable reference price
  • Execute block deals only in designated windows
  • Ensure all block deals result in delivery (no squaring off or reversal)
  • Understand different reference prices for morning vs afternoon windows

Important Dates

Circular Issuance Date: October 08, 2025

Effective Date: 60th day from issuance of circular (approximately December 07, 2025)

Implementation Timeline:

  • Market Infrastructure Institutions (MIIs) must put necessary systems in place before effective date
  • Amendments to byelaws, rules and regulations to be completed before effective date
  • Market participant notification to be completed before effective date

Impact Assessment

Market Impact:

  1. Institutional Trading: High impact on institutional investors and large traders who regularly execute block deals. The INR 25 crore minimum may exclude smaller institutional trades that previously qualified as block deals.

  2. Price Discovery: Introduction of afternoon window with intraday VWAP reference price improves price discovery mechanism compared to previous day closing price throughout the day.

  3. Trading Flexibility: Two windows provide more flexibility for timing large trades, though the narrow 15-minute windows may create execution pressure.

  4. Market Transparency: Same-day disclosure of block deal details enhances market transparency while the ±3% price band prevents excessive price deviation.

  5. Settlement Cycle Integration: Applicability to both T+1 and optional T+0 cycles ensures framework consistency across settlement mechanisms.

Operational Impact:

  1. Technology Systems: Stock exchanges, clearing corporations and depositories need significant technology upgrades to support dual window structure, VWAP calculation, and real-time dissemination.

  2. Risk Management: Surveillance systems must be enhanced to monitor both windows separately while maintaining risk containment measures.

  3. Broker Infrastructure: Trading members need to upgrade systems to handle different reference prices for different windows and ensure order size validations.

  4. Compliance Burden: Market participants must adapt order management systems to comply with new timing, pricing, and size requirements.

Strategic Considerations:

  1. Transaction Costs: Tight 15-minute execution windows may impact negotiation time and potentially increase transaction costs.

  2. Market Concentration: Higher minimum order size (INR 25 crores) may concentrate block deal activity among larger institutional players.

  3. Liquidity: Morning window using previous day close may see different liquidity patterns compared to afternoon window using intraday VWAP.

  4. International Alignment: Extended trading hours (08:45 AM to 05:00 PM) provide better alignment with global markets for cross-border institutional flows.

Impact Justification

Major structural change to block deal mechanism affecting all market participants executing large trades. Introduces new timing windows, reference pricing methodology, and increases minimum order size significantly to INR 25 crores, fundamentally altering block deal execution framework.