Blockage Discount


DEFINITION of 'Blockage Discount'

The difference between the market value of a security and its sale price when transacted under a block trade. Each blockage discount is negotiated by the involved institutional investors, which incorporates such factors as market liquidity and the size of the trade.

BREAKING DOWN 'Blockage Discount'

A block of securities will typically consist of 10,000 shares or debt securities valued over $200,000. Traders want to unload all of the securities quickly, but are often limited by market volume. To facilitate a fast exchange, a trader will sell the assets at a discount to another institutional investor.

  1. Institutional Investor

    A non-bank person or organization that trades securities in large ...
  2. Discount

    The condition of the price of a bond that is lower than par. ...
  3. Block Trade

    An order or trade submitted for sale or purchase of a large quantity ...
  4. Iceberg Order

    A large single order that has been divided into smaller lots, ...
  5. Block Order

    A signficant order placed for sale or purchase of a large number ...
  6. Block

    A large amount of the same security bought or sold by institutional ...
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