The Securities and Exchange Board of India (SEBI) has unveiled updated trading regulations for gold and silver exchange-traded funds, set to take effect on September 1. The revised framework aims to enhance price discovery, transparency, and safeguard investor interests. It seeks to ensure that ETF prices closely mirror the assets they represent and align domestic commodity ETF pricing with global markets.
Commodity ETFs like gold and silver funds will now commence each session with a pre-open call auction under the new guidelines. They will trade within dynamic price bands reflecting overnight shifts in global commodity markets. Initially set at ±6 per cent around the reference price, these bands can expand in 3 per cent increments after a cooling-off period, with no upper limit on band widening during a session.
SEBI has specified that the previous day’s closing price, determined using the last 30 minutes’ volume-weighted average price (VWAP), will serve as the basis for ETF prices starting September. In cases where no trades occur in the last 30 minutes, the day’s final traded price will be utilized. If no trades transpire on the preceding trading day, the most recent available Net Asset Value (NAV) will be employed. SEBI plans to transition to the closing NAV from one day before the trading day as the base price starting April 1, 2027.
This shift is intended to mitigate sharp premiums and discounts during market volatility and changing dynamics. Presently, stock exchanges rely on the ETF’s NAV from two trading days prior (T-2) to establish the base price for applying price bands.
