Block trade

In finance, a block trade is a trade that is usually at least 10,000 shares of a stock or $200,000 of bonds. It can also refer specifically to large trades that occur between institutional parties at a fixed price. For instance, an insurance company may hold a large stake in a company that they would like to liquidate completely. If this were put into the market as a large sell order, the price would sharply drop --- by definition, the stake was large enough to affect supply and demand. Instead, the first company may arrange for a block trade with another company through an investment bank, benefiting both parties: the selling company gets a more attractive purchase price, while the purchasing company can negotiate a discount off the market rates.

Block trading is a useful measure for analysts in order to assess where institutional investors are pricing a stock. Because in a merger or acquisition, a bid needs to "clear the market" (i.e. enough shareholders need to tender), it is most useful to see at what prices large "blocks" of stock are trading. These prices imply what the largest shareholders are willing to sell their shares for; thus in block trading analysis, small trades are ignored to avoid skewing the data.