Version 1
What is Block Trade?
Block Trade is a method of pairing and trading Single Stock Futures at the agreed price and contract amount. To help with insufficient liquidity Which will refer to SSF before understanding the place where it came to be the current block trade
Single Stock Futures (SSF) was originally started as Trading of futures contracts of reference stocks that we are interested in Most of these references are mostly members of SET50. And add another part to SET100 shares, which when combined Currently, there are a total of 69 underlying stocks that we can choose to sell Long-Short using Single Stock Futures as an aid to increase the rate of our portfolio.
But SSF trading is not as smooth as it should be … The reason is because most players in this field are general investors. Who come to buy and sell themselves, causing “liquidity” of this type of product is less, resulting in investors unable to trade easily For this reason, making SSF less popular. And investors do not pay much attention due to low liquidity problems
Until about 2 years ago, the securities companies took part in increasing liquidity for the SSF market. The method is that these securities companies will act as partners for all buyers. Provided that The buyer must purchase a minimum amount of SSF contract according to the criteria set up by the stock exchange.
Contracting of buyers this securities company is called “BLOCK TRADE” where, if the player wants to open the LONG status, the securities company will come to accept as a contract party.
Therefore, in the event that the stock price moves up Players will be profitable. And the opposite of the securities company will have to suffer losses But securities companies do not want to open this risk here. Therefore use risk prevention methods By buying “Real stock on the board” is equal to the amount that is a contract for the player. Therefore, the securities company will “No interest” from being a contractor with investors Only act as an intermediary for investors to take advantage of the rate of this product.
Example of the process of Block Trade (hypothetical numbers)
Players contact the private markers to request to block a 100,000 CBG stock.
Margate sends an order to open a long CBG 100 contract to a securities company that is a counterparty.
Securities companies purchase 100,000 CBG shares from the main board in order to prevent risks as mentioned above.
Customers have a long CBG status of 100 contracts or equivalent to having 100,000 CBG shares. *** All events take about 1-2 minutes. ***
Note: This transaction The securities company will have the cost of hedging. Therefore, the securities company will collect the player fees as a fee in this part as well.
After having the broker become an intermediary in this transaction SSF trading volume through Block Trade channel has grown 10 times within the last 3 years. Traditionally, with an average of 10,000 SSF trades per day in the BlockTrade period, when BlockTrade was done, the average value was up to around 80,000 contracts per day. On the day of trading, the amount of contracts Ever up to 150,000 contracts per day Why do players come to trade a lot of Block Trade !!
The possible reasons for causing players to enter Block Trade transactions are as follows:
The shares that can be made to block trade will be shares in SET50 and SET100 that have both foreign funds and proptrade as players. Therefore, the use of Technical Analysis in reference is based on theoretical principles rather than playing stocks. Small Cap general
Choose the direction in both LONG and SHORT. Therefore, no matter how the market is up, down. Or even sideways There are always opportunities for players.
Block Trade uses less money compared to buying shares in the market. So with the same amount of money If forecasting the price direction correctly, it will yield more return than buying the stock. (Of course, if the wrong way is hurt, too)
Example: Investors want to buy 100,000 CBG at a price of 60 baht if we actually buy stocks. We have to spend up to 6 million baht. But if we buy a CBG by doing “Block Trade”, we will place a minimum of 532,000 baht in the block trade only. That means we use 532,000 baht to buy a product worth 6,000,000. Once calculated, the purchase of CBG with Block Trade Will be able to provide a rate of up to 11.28 times (resulting from 6,000,000 / 532,000)
Therefore, if the CBG stock is up 1%, then we will get 11.28% profit from BlockTrade and if it comes down to 1%, we will be negative by 11.28% as well.
Conclude
Block Trade is to buy shares by placing only a part of money. With a rate of 5-25 times
Block Trade has gained more popularity. With an average trading volume of around 80,000 contracts per day (or equal to 80 million shares per day that is traded through Block Trade)
Not everyone is suitable for Block trade, but the person who is suitable for buying shares with Block Trade method is that the players themselves should Understand the product at a good level and can take risks
Note: For USD Futures and Agriculture Futures, Block Trade Volume data combines NLT (Negotiated Large Trade) and EFP (Exchange for Physical) trading.
Version 2
What is BLOCK TRADE?
- It is a service for buying and selling transactions for single stock futures contracts of 110 shares of underlying securities. (Most of them are shares in the SET100 group)
- This transaction will have Maybank Securities as a counterparty to investors to facilitate the transaction at every step.
- Trading through this channel will be recorded as BLOCK TRADE and investors will receive futures contracts of that stock as assets into their portfolios.
- The number of purchases – sales Minimum of each share will meet the criteria set by TFEX
Common point-difference between BLOCK TRADE and general stocks. Understand the BLOCK TRADE mechanism with a simple example. Usually, if an investor wants to own the status of a stock Investors must pay for the shares in full.
For example: if you want to buy CPALL shares worth 70 baht, 20,000 units. Investors must pay for the shares in full. For the purchase of 1,400,000 baht. For BLOCK TRADE, it is different from buying stocks. Investors use the minimum margin method, known as Initial Margin.
For example BLOCK TRADE in CPALL stocks.
Investors are required to purchase a minimum of 20 CPALL contracts*. (This 20 Block Trade position is equivalent to a 20,000 share holding position) and will use a minimum security deposit of 7,000 baht per 1 contract** that means A security deposit of 140,000 baht is required for this transaction. (10 times less than buying shares)
* The minimum number of contracts for each share varies. This value can be verified with your trustee investment advisor.
** Minimum Margin Number of Each Share will vary This value can be verified with your trustee investment advisor.
BLOCK TRADE has a higher ratio than stocks.
Investors can take advantage of the “compound rate” of this type of commodity. to increase investment opportunities to the investment rhythm that we can be confident in. From the above example, it can be seen that Investors will spend about 10 times less initial money on BLOCK TRADE than buying stocks. (Buy shares, spend 1,400,000 baht, while BLOCK TRADE pays a minimum of 140,000 baht)
This allows BLOCK TRADE traders to benefit from the “adjustment rate” and to hold the position as if we were holding a smaller amount.
It has equivalent holding status in different assets held for buying shares Investors will get “stocks” into the stock portfolio.
For BLOCK TRADE transactions, investors will get “Futures contracts” of that stock into the TFEX portfolio.
Some description
Investors can trade BLOCK TRADE in both LONG and SHORT status. If investors have a view positive for stocks Able to invest with LONG status and when investors have a view negative of the share price can open SHORT status.
The process of buying – selling BLOCK TRADE
Get your BLOCK TRADE trading account ready.
1. Have a TFEX account to support this transaction.
2. Customers have deposited collateral. ready for transaction
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HOW TO SEND BLOCK TRADE ORDER
1. Clients notify your investment advisor as follows:
1.1 Shares that you will open BLOCK TRADE
1.2 Select transaction status : LONG / SHORT
1.3 The number of contracts to open the contract
1.4 The share price that you want to open the contract
2. Investment advisor coordinates transactions
3. The customer receives confirmation and receives the status of BLOCK TRADE in the port.
Which stocks can we do BLOCK TRADE with?
Choose to trade both up and down. investors can Choose to trade BLOCK TRADE, both LONG and SHORT status.
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MINIMUM CONTRACTS FOR EACH STOCK BLOCK TRADE
Each security has a different minimum BLOCK TRADE transaction.
Investors choose the stocks that we will do BLOCK TRADE and check the minimum amount to make a position as shown in the picture above.
(In general, 1 contract position is equivalent to us holding 1,000 shares)
For example: if we do BLOCK TRADE on stocks
ADVANC We have to open a minimum of 20 contracts (equivalent to 20,000 shares).
AMATA, we need to open a minimum of 100 contracts (equivalent to 100,000 shares).
AAV, we need to open a minimum of 500 contracts (equivalent to 500,000 shares).
SUPER We have to open a minimum of 1,000 contracts (equivalent to 1,000,000 shares).
