Intra-day trades fuelling bulk deals

A significant proportion of bulk deals reported on the Bombay Stock Exchange are on account of intra-day trading and arbitrage transactions.

According to Sebi guidelines, trading volumes in a single scrip accounting for more than 0.5 per cent of the equity capital of the company done by any exchange member should be reported as a bulk deal.

Thus bulk deals reported by stock exchanges are inclusive of intra-day trading transactions carried out by day traders attached to the member broker.

"Unlike popular perception, not all bulk deals reported on the stock exchanges are buy and sell matched positions. There are also a large number of intra-day transactions." Confirmed an official from the BSE.

Transactions executed by several stock brokers such as H J securities, Asit C Mehta, Ramesh M Damani, Daulat Securities, Ghalla Bhansali Stock Brokers seem to be arbitrage transaction executed by jobbers.

For instance, H J Securities, which operates from a small outfit in Cama Building, adjacent to the BSE building in South-Mumbai, has about 50-odd traders who trade intra-day for wafer thin margins.

For these day traders, anything more than 30 seconds is "long-term" and entails "market risk". The average transaction size in these cases is as low as Rs 5000.

"Clubbing arbitrage volumes or intra-day speculative transactions by clients under bulk deals gives a misleading picture" said a broker.

In the past few weeks there has been talk about price manipulation in penny stocks and malpractices such as conversion of black money to white by routing dubious transactions through the exchange.

This turned the spotlight on several broking firms which are regulars in the bulk deals list on suspicion that they may be creating false volumes and misguiding the markets.

However, that may not be entirely true.

"Soon this confusion will be sorted out as block deals (which are buy and sell matched deals, not bulk deals) will be reported separately" said a BSE official.

Usually, block deals or matched transactions are executed by brokers doing clientele business which includes large broking houses dealing for domestic and foreign funds.