Block House

DEFINITION of 'Block House'

A brokerage firm with the primary focus of locating potential buyers and sellers of large trades. A block house typically deals with institutional clients rather than individual investors, since each transaction represents millions of dollars. Examples of institutional clients include mutual funds and pension funds that assume significant security positions. Because of the nature of block house firms, their trading activity can have a considerable effect on the financial markets. Block trades are generally considered to be those dealing with more than 10,000 shares of stock (excluding penny stocks), or any other trade that involves a high monetary value.

BREAKING DOWN 'Block House'

A brokerage firm is a company that acts as an intermediary between buyers and sellers to facilitate transactions. The buyers and sellers must pay commissions and other transaction fees in exchange for the brokerage firm's assistance in executing any trades. A block house is a type of brokerage firm that deals primarily in large trades, with clients ranging from corporations and banks to insurance firms and academic funds. Some investors and analysts try to follow the money or stay ahead of market trends by watching block trade activity. Institutional investors sometimes trade large blocks of securities directly, to avoid brokerage commissions, in a practice called fourth market.

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