SEBI Update - Norms for Base Price, Price Bands, Call Auction in pre-open session and Close-out procedure for Exchange Traded Funds (ETFs)

SEBI has revised the norms governing Exchange Traded Funds (ETFs) to improve price discovery and align ETF trading mechanisms with the movement of their underlying assets. Effective from 1 September 2026, the base price for ETFs will be determined using the previous day's closing price (last 30-minute VWAP) instead of the T-2 day NAV, with a transition to T-1 day closing NAV targeted from 1 April 2027. Dynamic price bands have been introduced for Equity and Debt ETFs (initial ±10%, extendable up to ±20%) and Commodity ETFs (initial ±6%, extendable in stages), while Overnight and Liquid ETFs will continue to have a fixed ±5% band. SEBI has also prescribed revised close-out procedures for Overnight and Liquid ETFs and mandated a pre-open call auction mechanism for Gold and Silver ETFs to facilitate efficient price discovery. These measures are aimed at reducing pricing inefficiencies, enhancing market stability, and strengthening investor protection in the ETF segment.