Block Trade
A large securities transaction — typically 10,000 or more shares or $200,000 or more in value — executed privately to avoid moving the market price.
What is Block Trade?
A block trade is a large-volume securities transaction that is negotiated and executed privately between institutional counterparties, typically outside of the public exchange order book, to avoid the significant market impact that would result from submitting the order to open market trading. In US equity markets, a block trade is generally defined as involving at least 10,000 shares or $200,000 in total value. Block trades are often facilitated by a broker-dealer acting as intermediary or by dark pools and crossing networks. By keeping large orders away from the lit market, the buyer and seller can transact at or near the current market price without triggering a cascade of price movements driven by other market participants observing the large order.
Example
A pension fund needs to sell 2 million shares of a mid-cap stock. Selling through the open exchange over days would depress the price. Instead, the fund arranges a block trade through an investment bank, which finds a buyer (another institution) willing to take the entire position at a negotiated price slightly below the current market, completing the transaction in one step.