1. What are block trades?
Stock sales big enough to send market prices tumbling. Highly secretive, market moving and potentially treacherous — block trading has been one of Wall Street’s most delicate arts since it emerged as a major business line more than a half century ago. Legendary Goldman Sachs deal maker Gus Levy pioneered the business in the 1960s, helping position his firm to become the trading powerhouse that it is today. Block trading is one of few Wall Street businesses where relationships still drive the flow of deals.
Selling one share of stock can be simple: It generally goes for whatever price other shares of the same company are trading for at the moment. Selling large numbers of shares can be complicated, since the very act of selling can drive down the price — especially if others get wind of a big stake being sold.
The US Securities and Exchange Commission (SEC) and Justice Department are digging into how such “block trades” work, specifically into how bankers work with hedge funds to privately carry out such deals, which have been booming in recent years. A similar case in Japan has already resulted in charges of market manipulation.
