SEBI Revises ETF Framework with Dynamic Price Bands; New Rules Effective from September 1, 2026

The Securities and Exchange Board of India (SEBI) has introduced a revised framework for exchange-traded funds (ETFs), bringing changes to base price calculations, dynamic price bands and price discovery mechanisms. The new framework aims to improve trading efficiency and investor protection by better aligning ETF prices with movements in their underlying assets. 

How Will ETF Base Prices Be Calculated? 

Under the revised framework, an ETF's base price will be determined using the previous trading day's closing price, calculated as the volume-weighted average price (VWAP) of trades executed during the last 30 minutes of trading. 

If no trades occur during that period, the last traded price of the day will be used. In cases where there are no trades throughout the trading session, the latest available closing net asset value (NAV) will serve as the base price. 

SEBI also stated that stock exchanges and asset management companies will work towards adopting the T-1 day closing NAV as the base price from April 1, 2027, subject to operational readiness. 

SEBI Introduces Dynamic Price Bands for ETFs 

For equity and debt ETFs, excluding overnight and liquid ETFs, SEBI has introduced dynamic price bands with an initial limit of ±10%. The bands can be expanded up to ±20% after a prescribed cooling-off period. 

The cooling-off period will be 15 minutes if the ETF price moves 9.90% or more from the base price and 5 minutes if such movement occurs during the final 30 minutes of trading. 

Meanwhile, overnight and liquid ETFs will continue to operate under a fixed price band of ±5%. 

What Changes Have Been Introduced for Gold and Silver ETFs? 

For commodity ETFs tracking gold and silver, SEBI has prescribed dynamic price bands with an initial limit of ±6%, which can be widened in stages of 3% following a cooling-off period based on market movements. 

Unlike equity ETFs, there will be no upper or lower limit on these price bands and no restriction on the number of times they can be expanded during a trading session. 

SEBI has also introduced a pre-open call auction mechanism for gold and silver ETFs to facilitate better price discovery, considering that global bullion markets continue trading beyond domestic market hours. 

Read More: SEBI Targets 5-Day FPI Onboarding Through Digital Registration Process 

When Will the New ETF Framework Come into Effect? 

SEBI has also revised close-out norms for overnight and liquid ETFs as part of the updated framework. The revised ETF regulations will come into effect from September 1, 2026. 

Conclusion 

SEBI's revised ETF framework introduces changes to base price calculations, dynamic price bands, and price discovery mechanisms across different ETF categories. The new rules are intended to improve market efficiency and better align ETF trading with movements in their underlying assets while strengthening investor protection. 

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.