SEBI Proposes New Method for Stock Price Bands Across Multiple Exchanges

The Securities and Exchange Board of India (SEBI) has proposed a common framework for determining the base price and daily price bands for stocks listed on multiple exchanges, as per news reports.  

The proposal is to address situations where the same stock trades at different prices across exchanges because of low trading activity on one platform. 

How the Framework Would Apply 

If a stock trades on only one exchange during a trading session, the closing price on that exchange would be used by all other exchanges to calculate the next day's base price and price band.  

If the stock trades on more than one exchange but remains inactive on another, the exchange with no trades would use the closing price from the platform that recorded the highest trading volume. 

Reason Behind the Proposal 

SEBI said exchanges currently calculate circuit limits using their own previous day's closing prices. In stocks with low trading volumes, this can result in different price bands across exchanges.  

Where trading continues on one exchange but remains absent on another, the inactive exchange may continue to show an older price, leading to differences in valuation and reduced liquidity. 

Sharing of Closing Price Data 

To implement the proposal, exchanges may need to establish arrangements for sharing closing-price data. The regulator has clarified that where a stock trades on all exchanges, or where there are no trades on any exchange, each exchange will continue to use its own closing price for the following trading session. 

Consultation Process 

The proposal has been issued through a consultation paper following discussions by SEBI's Secondary Market Advisory Committee in April.  

The regulator has invited comments from market participants and other stakeholders until 2 July before taking a final view on the framework. 

Read More: Banking Stocks Rally as RBI Measures Boost Sentiment; HDFC Bank, BoB, Union Bank Gain Up to 3%! 

Conclusion 

The draft framework sets out rules for using closing prices across exchanges in cases of inactive trading. The proposal is open for stakeholder feedback before any final decision is taken. 

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