has revised the norms governing the base price, price bands, pre-open call auction, and close-out mechanism for equity, debt, and commodities ETFs.
Currently, a fixed ±20% price band applies to equity, debt, and commodity ETFs, based on the T-2 day NAV. For Overnight , the price band is ±5%, according to SEBI’s 15 June 2026 circular.
The new framework changes how ETF prices are determined. The rules originally scheduled to take effect from 1 September 2026 will now come into effect on 7 September 2026, following SEBI’s circular last week.
Here’s what ETF need to know.
What is the new rule for the base price of ETFs?
“Every ETF is allowed to move only so far up or down in a day. That distance is measured from a reference number called the base price,” Gaurav Didwania, Partner and Fund Manager, Qode Advisors, explained.
Vaibhav Porwal, Co-founder, Dezerv added that instead of the T-2 NAV, an ETF will now use the previous day’s closing market price, based on the average trading price during the last 30 minutes. Investors should see fewer situations where an ETF’s permitted range looks out of step with its current value.
Mayank Jain, Market Analyst, Share.Market by PhonePe explained that “under the new regulations, if an ETF records no trades during the final 30 minutes of T-1 day, its base price defaults to its Last Traded Price (LTP) from earlier that day”.
He added that if the ETF did not trade at all on T-1 day, the base price reverts to its latest available closing NAV. Previously, the system applied the T-2 day NAV regardless of whether the ETF actually traded on T-1.
For illiquid ETFs, Jain said this fallback prevents unrealistic price limits caused by thin trading and keeps trading boundaries grounded in actual market value.
“SEBI has admitted this is only stage one,” said Vedant Gupte, Co-Founder and CEO of Investment platform Trackk, noted. He said using traded prices can still carry yesterday’s premium into today’s band. SEBI has asked exchanges and AMCs to resolve the operational issue and move to the T-1 closing NAV by 1 April 2027.
What will change in the price bands of equity and debt ETFs?
For equity and debt ETFs (excluding Overnight and Liquid ETFs), dynamic price bands will apply. The initial band will be ±10%, which can be expanded to ±20% after a cooling-off period.
Didwania explained that the price band is the maximum distance an ETF is allowed to travel from its reference price in a single day. A 10% band means the price cannot go more than 10% above or below that reference.
“The earlier 20% band was so wide that it rarely acted as a safeguard. The tighter 10% starting band provides protection against freak prints while retaining the ability to accommodate a genuine sell-off,” Gaurav Arora, Head of Research, SAHI explained.
This should improve price stability during volatile sessions and reduce sudden flash crashes. However, very rapid moves could result in temporary execution pauses until the band is widened, Jain said.
Sougata Basu, Founder and CEO, CashRich explained the cooling-off rule. “Say the ETF trades at 9.9% above its base. A 15-minute cooling-off period starts, or 5 minutes if it is the last half hour of the session. Trading does not stop. You can still buy and sell, just not beyond the limit. After the cooling-off, the band widens by 5%, only on the side the price is moving. The other side does not shift”.
The cooling-off therefore creates a pause before the range expands rather than allowing a 20% move at once. During this period, investors may see a one-sided order book or wider buy-sell spreads, Basu noted.
What is going to change in gold and silver ETFs?
For commodity ETFs, dynamic price bands will apply, with an initial ±6% band, which can be widened by 3% of the base price after a cooling-off period.
Arora explained that “earlier, gold and silver ETFs sat inside the same wide 20% band as everything else. Now the day starts with a 6% band, which can be widened in 3% steps, with no fixed limit on how many times”.
If global prices move sharply overnight, exchanges can even widen the band before the market opens. Investors should check the indicative NAV (iNAV) before buying, Arora said.
Didwania added that after a large overnight gap, investors should expect successive 3% adjustments with pauses rather than one jump. Trading during this adjustment can be costly because the ETF’s premium or discount to iNAV may be widest at that point.
Why is SEBI introducing a pre-open call auction for gold and silver ETFs?
Arora explained that “gold and silver keep trading around the world at night, but the Indian ETF only wakes up in the morning. Till now, whatever the first trade happened to be, that became the opening price, even if it was one small order”.
From September 7, buy and sell orders will be collected for a few minutes before the market opens, and one fair opening price will be worked out, he said.
Basu added that stocks have had a pre-open auction for years. Gold and silver ETFs did not have this mechanism, so there was no separate call auction to establish an equilibrium opening price.
What is changing in the close-out procedure for ETFs?
Jain explained that when a seller fails to deliver ETF units, and the exchange cannot buy them in an auction, a “close-out” settlement process occurs. For Overnight and Liquid ETFs, SEBI has updated the close-out price to be the higher of two calculations:
- The highest price recorded for that ETF on the exchange during the relevant settlement cycle up to the auction/close-out date.
- 5% above the latest available closing price on the day auction offers are called.
Basu added that for all other ETFs, the existing close-out rule will continue to apply. The close-out amount will be the higher of 20% above the closing price or the highest price during the settlement period.
What is SEBI’s cross-exchange ETF rule?
SEBI mandated that when an ETF’s price band is widened on one exchange, the same band must apply across all exchanges where it trades. This cross-exchange synchronisation prevents price discrepancies and arbitrage trades, Jain explained.
Arora said the cross-exchange rule is also important: the same ETF should not have different trading limits on NSE and BSE.
Most large ETFs are listed on both exchanges. Harmonising band widening prevents an arbitrage created purely by differing rules, Didwania said.
What are the key takeaways for retail investors?
Porwal said the changes are less about restricting ETF trading and more about improving the quality of prices at which investors trade.
Basu added that ETFs will now have a framework that better reflects their underlying assets instead of relying on a two-day-old NAV. Bands are tighter normally, can expand when the underlying moves sharply, and gold and silver ETFs get a proper opening auction.
For investors, the key is to use limit orders, check the ETF’s price against its iNAV before buying, and avoid chasing an ETF when it hits its price band, Basu suggested.