Block House

  

A block house is a brokerage firm that focuses on handling large trades from institutions, mutual fund managers, banks, insurance companies, or pension fund managers.

Block houses usually mange transactions that involve at least 10,000 shares of stock, or $200,000 in market value. Large block house trades can cause volatility in the general stock market, so many investors like to keep a close eye on their activities.

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Finance: What is a Block Trade?22 Views

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Finance a la shmoop.. what is a block trade? yeah you think this was the yellow Marvin [A monopoly board]

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Gardens trio bartered for the green Pennsylvania Avenue set but it's not

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instead a block trade happens when a huge, you know block yes clever naming

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there of shares needs to get sold think company founder just got divorced and [Man and woman sitting on a sofa]

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old husband wants the dough fast she just wants to get rid of him you know

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lose 185 pounds so of her 28 million shares she or rather her bank or brokers

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put together a group of a half a dozen buyers who then buy the stock in a clean [Stock is dusted]

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block trade there's a strange paradigm here sometimes companies shares are

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thinly traded or not liquid meaning that there isn't a ton of volume every day in

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the stock and large institutions wanna buy in big like to the tune of 5 million [Big institutions buy stock]

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shares but if they buy 50,000 shares a day in the market well they'll likely

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move the stock from say 18 bucks a share to 25 bucks a share by the time they're

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done buying so sometimes supply of block trades is constrained and the trade

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usually with price negotiated well beforehand goes off at a premium to

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where it was regularly trading like that eighteen dollar figure maybe implies a

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block trade that happens at 20 bucks the seller is usually happy because if they

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dump the shares at fifty thousand a day into the market while they'd likely [Dump truck dumps stocks on the floor]

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drive down the stock price to fifteen dollars or less in the process got it?

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and this way they got a $2 premium above that 18 bucks 20 minus eighteen two

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dollars there yeah and the institution is happy because now they own the [Institution smiling]

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however many millions of shares that they own at a twenty dollar base price

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instead of something likely much higher if they've gone into the market and

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bought em, so that's when supply is constrained in a thinly traded low

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volume in demand stock much more common as a block trade where there's a whole

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lot of supply coming on board and not nearly the demand of buyers or investors

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to take over the stock so it trades at a meaningful discount to whatever price it

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was trading at like in the eighteen dollar a share case well maybe that

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block trade happens at 17.20 or 16.50 or

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thereabout so that's a block trade and here's a blockhead yeah ask your parents [Blockhead figure appears]

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if you don't get the reference here...

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