The regulator has proposed shifting the reference price for ETFs from the existing T-2 day NAV-based system to T-1 day metrics, in order to eliminate the current one-day lag
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The Securities and Exchange Board of India (SEBI) on Friday proposed changes to the methodology for determining base prices and price bands for exchange-traded funds (ETFs), with the aim of aligning ETF trading more closely with movements in their underlying assets.
The regulator has proposed shifting the reference price for ETFs from the existing T-2 day NAV-based system to T-1 day metrics, in order to eliminate the current one-day lag. As reported earlier by businessline, the regulator had been examining the possibility of moving to a more current reference price framework to improve price discovery and reduce operational friction.
SEBI has sought views on four possible options for determining the base price on the trading day (T day): the closing traded price of T-1 day (weighted average of the last 30 minutes), the closing NAV of T-1 day (if available before market open), the average iNAV of the last 30 minutes on T-1 day, or the latest available indicative NAV (iNAV) of T-1 day.
“The closing NAV of ETFs typically differs between T-1 and T-2 Day,” SEBI said, adding that the current practice of using T-2 NAV for applying price bands creates a built-in lag. Further, corporate action adjustments are presently carried out manually on the T-2 NAV, which “increases the risk of errors and omissions.”
Uniform price band
At present, ETFs are subject to a uniform fixed price band of ±20 per cent on the base price. SEBI has proposed replacing this with a calibrated mechanism for most categories. For equity and debt index-linked ETFs, an initial price band of ±10 per cent has been proposed, which may be flexed up to ±20 per cent during the trading session, subject to cooling-off periods and trade quality parameters.
The regulator observed that “in case of more than 99.8 percent of the ETFs in equity/debt segment, the max movement was less than or equal to 10 per cent,” indicating that a narrower initial band may be adequate in most cases.
Gold/Silver ETFs
For gold and silver ETFs, an initial band of ±6 per cent has been proposed, with staged intraday flexing up to ±20 per cent. Overnight and TREPs (Tri Party Repo Dealing System) ETFs would continue with the existing ±5 per cent band.
SEBI has also asked whether the price bands for commodity ETFs should be aligned with the aggregate daily price limits applicable to their underlying derivative contracts.
The regulator has invited public comments on the proposals till March 6.
Published on February 13, 2026