What are Inter Institutional Deals and Bulk deals?, Features
What are Inter Institutional Deals and Bulk deals?: Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme under which, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. How, a ceiling limit has been set by RBI on the overall investment for these investors. That is as follows:
|Investor type||% of the paid up capital of the Indian company|
|Foreign Institutional Investors (FIIs)||24|
|Non-Resident Indians (NRIs)||10|
|Persons of Indian Origin (PIOs)||10|
The limit is 20 % of the paid up capital in the case of public sector banks.
On daily basis, RBI monitors the ceilings on FII/NRI/PIO investments in Indian companies. For effective monitoring, RBI had fixed cut-off points that are 2% points lower than the actual ceilings. Accordingly, the cut-off point, for instance is fixed at 8% for NRI/PIOs and 22% for FIIs etc.
Inter Institutional Deals:
However, transactions between different FIIs (inter FII) have to be monitored by the exchanges to enable the RBI to ensure that FII transactions do not take place in securities where the FII holdings have already crossed the overall limit due to any reason. A separate trading segment has been introduced by the exchanges to facilitate execution of such Inter-Institutional deals in companies where the cut-off limit of FII investment has already reached (2% lower than the ceiling specified by RBI). This is called Inter-Institutional segment. And the trading deals that take place through this are Inter-Institutional Deals.
Features of Inter-Institutional Deals:
- Order placement:
- Sell orders: Only Foreign Institutional Investors (FIIs) are permitted to place sell orders.
- Buy orders: Only FII’s, DFI’s, Banks, Mutual Funds and Insurance Companies, Pension Funds registered under PFRDA are allowed to place the buy orders.
- Where RBI has stipulated collective limits in certain securities for FIIs, NRIs and PIOs, these entities can place orders on both buy and sell sides
- In the exchange, trading takes place under series type ‘IL’ under market type ‘N’
- Settlement: Trading shall take place under T+2 rolling settlement only i.e. on the 2nd working day after a trade. Settlement of transactions shall be on dematerialized mode only.
- Price band: The price bands and the base price applicable for this segment are the same as those applicable for the corresponding normal market on that day.
- No trade warehousing is allowed in case of inter-institutional deals.
- Non delivery of securities results in compulsorily close outs on the settlement day as per rates applicable for close out in the normal rolling segment
- A stock market trade deal where total quantity bought or sold is more than 0.5% of the number of equity shares of a listed company is called as bulk deal.
- Unlike block deals, bulk deals do not need to happen in a single transaction. And they take place in the normal trading window provided by the registered brokers.
- Brokers who engage in facilitating bulk deals are responsible to notify the stock exchanges on daily basis. If the bulk deal takes place through a single transaction, it should be notified to the exchange immediately. If the deal is executed in multiple transactions, broker should inform the stock exchange within 1 hour from the closure of trading.
- Bulk deals should take place on trade to trade basis and not allowed to be squared off. Every successful deal should result in delivery.
- Stock exchanges display on their websites the information about the bulk deals by the end of the day. This can be accessed by visiting following URLs: