New Base Price Methodology
Going forward, the base price for ETFs will be the previous day's closing market price, calculated as the Volume Weighted Average Price (VWAP) of the last 30 minutes of trading on T-1. This is more current than the T-2 NAV and better reflects where the ETF actually traded on the previous day.
If there is no trading in the last 30 minutes of T-1, the Last Traded Price of the day will serve as the base price. If the ETF did not trade at all on T-1, the latest available closing NAV will be used as the fallback. The base price will also be adjusted for any corporate actions.
SEBI has also set a medium-term target. Stock exchanges and Asset Management Companies are expected to work towards using T-1 closing NAV as the base price with effect from April 1, 2027, once the operational infrastructure to support that is in place.
Dynamic Price Bands for Equity and Debt ETFs
The fixed ±20% band for equity and debt ETFs (excluding overnight and liquid ETFs) has been replaced with a dynamic band. Trading will begin with an initial price band of ±10%. If trades are executed at or above 9.90% from the base price, a cooling-off period of 15 minutes will apply during which trading continues within the prevailing band. After the cooling-off period, the band is expanded by 5% in the direction of the price movement, up to a maximum of ±20%. This expansion can happen a maximum of two times in one direction.
An important detail: the band is flexed only in the direction of the price movement. The opposite side of the band does not slide. If a band is flexed at one exchange, the same applies across all exchanges trading that ETF. During the last 30 minutes of the trading session, the cooling-off period is reduced to 5 minutes.
Overnight ETFs and Liquid ETFs remain unchanged; they retain their existing fixed ±5% price band.
New Framework for Commodity ETFs: Gold and Silver
For gold and silver ETFs, the initial price band has been set at ±6%, replacing the earlier fixed ±20% band. The band can be widened in stages of 3% after a cooling-off period, with the cooling-off triggered when trades are executed at or above 5.90% from the base price. The cooling-off period here is also 15 minutes during regular trading hours and 5 minutes in the last 30 minutes of the session.
Given that gold and silver trade continuously in international markets even when Indian exchanges are closed, SEBI has added a specific provision for exceptional circumstances. If global commodity prices move sharply beyond the 6% limit after domestic market hours, stock exchanges can relax the initial band by giving appropriate notice to the market with relevant justification. There is no upper or lower cap on the price band for commodity ETFs, and no restriction on how many times the band can be flexed in a session.
Pre-Open Call Auction for Gold and Silver ETFs
A pre-open call auction session will now be introduced for commodity ETFs: gold and silver, similar to the mechanism that already exists for equities. Since the underlying commodities trade globally around the clock, a call auction in the pre-open session will help establish an equilibrium price for ETF units before regular trading begins, improving price discovery and reducing opening gaps. The mechanism follows the same process as prescribed for stocks.
Revised Close-Out Procedure for Overnight and Liquid ETFs
For overnight and liquid ETFs, the close-out price will be the higher of two options: the highest price recorded in that ETF on the exchange during the relevant settlement period up to the date of auction or close-out, or 5% above the latest available closing price on the day auction offers are called. For all other ETF categories, the existing close-out provisions under the circular continue to apply.
