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.

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