The regulator has also replaced the fixed 20 per cent price band for equity and debt ETFs with dynamic price bands
The Securities and Exchange Board of India (SEBI) has revamped the trading framework for exchange traded funds (ETFs), introducing dynamic price bands, a new methodology for determining base prices and a pre-open call auction for commodity ETFs to bring ETF trading more in line with movements in their underlying assets.
The changes seek to address the mismatch created by the existing framework, under which ETF price bands were based on a two-day-old net asset value (NAV) and a uniform price limit irrespective of the underlying asset’s volatility. The revised norms will come into effect from September 1.
“In order to address the issues involved due to lag of 1 trading day in base price of ETFs and the fixed price band of ETFs not being commensurate with the price range of the underlying… the norms for determination of base price, price bands, call auction in pre-open session and close-out mark-up for ETFs are provided below,” SEBI said in its circular on Monday.
Closing price
Instead of the T-2 day NAV, exchanges will use the previous day’s closing market price, calculated as the last 30-minute volume weighted average price (VWAP). Where there is no trading during the final 30 minutes, the last traded price will be used, while the latest available NAV will serve as the fallback. SEBI said exchanges and mutual funds should work towards using the T-1 closing NAV as the base price from April 1, 2027.
The regulator has also replaced the fixed 20 per cent price band for equity and debt ETFs with dynamic price bands. These ETFs will begin trading within a 10 per cent band, which can be expanded in stages of 5 percentage points up to 20 per cent after a cooling-off period if prices hit the threshold. Overnight and liquid ETFs will continue to have a fixed 5 per cent band.
Metal ETFs
For gold and silver ETFs, the initial price band has been set at 6 per cent and can be widened in stages of 3 per cent after cooling-off periods. Exchanges have also been given flexibility to relax limits further in exceptional circumstances if global commodity prices move sharply after domestic markets close.
SEBI has also introduced a pre-open call auction mechanism to improve price discovery for gold and silver ETFs, similar to the process followed for stocks. The regulator has also revised the close-out procedure for overnight and liquid ETFs while retaining the existing mechanism for other ETF categories.
Published on June 15, 2026