Description

SEBI modifies the Block Deal Framework introducing morning and afternoon trading windows with specific reference prices, maintaining INR 25 crore minimum order size.

Summary

SEBI has revised the Block Deal Framework through Circular SEBI/HO/MRD/POD-III/CIR/P/2025/134 dated October 08, 2025. The new framework introduces two distinct trading windows - a morning window (08:45 AM to 09:00 AM) using previous day closing price as reference, and an afternoon window (02:05 PM to 02:20 PM) using VWAP calculated from 01:45 PM to 02:00 PM trades. The minimum order size remains INR 25 crores with price range of ±3% from reference price. These provisions apply to both T+1 and optional T+0 settlement cycles.

Key Points

  • Stock exchanges can now set trading hours between 08:45 AM to 05:00 PM for block deal mechanism
  • Morning Block Deal Window: 08:45 AM to 09:00 AM with previous day closing price as reference
  • Afternoon Block Deal Window: 02:05 PM to 02:20 PM with VWAP (calculated from 01:45 PM to 02:00 PM trades) as reference
  • Price range: Orders must be within ±3% of applicable reference price, subject to surveillance measures and price bands
  • Minimum order size: INR 25 crores maintained
  • All block deal trades must result in delivery and cannot be squared off or reversed
  • Stock exchanges must disseminate block deal information (scrip name, client name, quantity, price) to public after market hours on same day
  • Provisions applicable to both T+1 and optional T+0 settlement cycles

Regulatory Changes

  • Modified Paragraph 1.2 of Chapter 1 of SEBI Master Circular: Updates block deal framework provisions
  • Modified Paragraph 3.5 of SEBI Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/172 dated December 10, 2024: Revises block deal window provisions under optional T+0 settlement cycle
  • New Trading Window Structure: Replaces previous block deal window timings with two distinct windows (morning and afternoon)
  • New Reference Price Methodology: Introduces different reference prices for each window - previous day closing price for morning window and intraday VWAP for afternoon window
  • VWAP Calculation Period: Exchanges must calculate and disseminate VWAP between 02:00 PM to 02:05 PM for afternoon window execution

Compliance Requirements

  • Stock Exchanges: Must implement new trading window timings, set up VWAP calculation systems, ensure proper dissemination of block deal information after market hours
  • Clearing Corporations: Must apply all surveillance and risk containment measures applicable to normal trading segment to block deal windows
  • Depositories: Must ensure appropriate settlement practices for block deal trades
  • All Market Infrastructure Institutions (MIIs): Required to take necessary steps, put in place systems for implementation, make necessary amendments to byelaws/rules/regulations, and bring provisions to notice of market participants and investors
  • Market Participants: Must ensure orders are within ±3% price range of applicable reference price, meet minimum order size of INR 25 crores, and ensure delivery-based settlement without squaring off

Important Dates

  • Circular Issue Date: October 08, 2025
  • Effective Date: 60th day from issuance of circular (approximately December 07, 2025)
  • Morning Block Deal Window Timing: 08:45 AM to 09:00 AM (daily once implemented)
  • VWAP Calculation Period: 01:45 PM to 02:00 PM (daily once implemented)
  • VWAP Dissemination Period: 02:00 PM to 02:05 PM (daily once implemented)
  • Afternoon Block Deal Window Timing: 02:05 PM to 02:20 PM (daily once implemented)

Impact Assessment

Market Impact: The dual-window structure provides more flexibility for large institutional investors to execute block trades. The morning window allows pre-market block deals based on previous day’s closing, while the afternoon window enables intraday execution based on current market conditions reflected in VWAP. This could increase block deal activity and improve price discovery.

Operational Impact: Stock exchanges need significant system upgrades to calculate and disseminate VWAP within the 5-minute window (02:00-02:05 PM), implement dual window trading infrastructure, and ensure real-time surveillance across both windows. Clearing corporations and depositories must align settlement processes for both T+0 and T+1 cycles.

Participant Impact: Institutional investors and brokers gain more strategic options for executing large trades with two reference price mechanisms. However, they must adapt trading strategies to optimize between morning (previous close-based) and afternoon (VWAP-based) windows. The unchanged INR 25 crore minimum maintains high entry threshold for block deals.

Risk Management: The ±3% price band from reference prices provides controlled price discovery while the mandatory delivery requirement eliminates speculative trading in block windows. Exchanges must implement enhanced surveillance to monitor both windows independently.

Impact Justification

Significant changes to block deal framework affecting all large institutional trades, modifying trading windows, reference pricing mechanisms, and operational requirements for exchanges and market participants.