Institutional investors use block trades because they allow the execution of large orders without causing major disruptions in the open market. A block trade typically involves a significant number of shares or bonds, often exceeding the volumes that can be comfortably executed through regular exchanges. If such trades were placed directly on the market, they could trigger sudden price swings, exposing the investor to unfavourable execution and unnecessary costs.

By conducting block trades, usually through brokers, dealers, or private platforms like dark pools, institutions can negotiate prices privately and minimise market impact. This helps them secure better execution while maintaining confidentiality about their trading intentions. Large funds, such as pension funds, hedge funds, or mutual funds, often rely on block trades to rebalance portfolios, enter or exit positions, or adjust exposures more discreetly and efficiently.

Block trades also allow institutions to manage risk more effectively. Instead of breaking large orders into smaller ones over time, which can reveal trading strategies to competitors, a single block transaction provides speed and reduces information leakage. Ultimately, block trades help institutional investors achieve liquidity, efficiency, and reduced slippage when dealing with large-scale investments.