New ETF Trading Rules From September 7: 10% and 6% Price Bands Explained
Introduction
The Securities and Exchange Board of India (SEBI) has introduced revised trading rules for exchange-traded funds (ETFs) from September 7, 2026. The framework changes the way ETF base prices and price bands are determined and introduces a pre-open call auction for Gold and Silver ETFs. The implementation was initially scheduled for September 1 but was later extended to September 7 . For investors using a trading account, the changes are important because they affect the permitted daily price range and opening price discovery of ETFs.
ETF Trading Rules Now Differ by Asset Class
SEBI has introduced different price-band structures based on the type of ETF.
|
ETF Category |
Starting Band |
Expansion Rule |
|
Equity ETFs |
±10% |
Can expand up to ±20% in stages |
|
Debt ETFs |
±10% |
Can expand up to ±20% in stages |
|
Gold ETFs |
±6% |
Expands in 3-percentage-point steps |
|
Silver ETFs |
±6% |
Expands in 3-percentage-point steps |
|
Overnight ETFs |
±5% |
Fixed |
|
Liquid ETFs |
±5% |
Fixed |
For Equity and Debt ETFs, the band can be widened after a 15-minute cooling-off period, subject to the prescribed conditions. The cooling-off period is reduced to five minutes during the last 30 minutes of trading. Gold and Silver ETFs can be widened in 3-percentage-point increments, with further widening subject to applicable conditions . The differentiated structure is particularly relevant for Gold and Silver ETFs because global bullion markets can move while Indian markets are closed.
ETF Base Price Method Also Changes
Earlier, ETF price bands were based on the T-2 day NAV. Under the new framework, the initial base price is the previous trading day's closing price, calculated using the last 30-minute VWAP . If there is no trade during the final 30 minutes, the day's Last Traded Price (LTP) is used. If there was no trade during the previous session, the latest available closing NAV is used. From April 1, 2027, SEBI plans to move to the previous day's closing NAV as the base price.
Gold and Silver ETFs Enter the Pre-Open Session
Another major change is the introduction of a pre-open call auction for Gold and Silver ETFs. Orders are collected before regular trading and matched at a single opening price, helping improve price discovery after overnight movements in global bullion prices . Investors using the best stock market app in India should therefore pay attention to the ETF's market price, indicative NAV (iNAV), liquidity and underlying asset movements before placing orders.
What Do the New ETF Rules Mean for Investors?
The new framework does not guarantee that an ETF will trade exactly at its NAV. ETFs can continue to trade at a premium or discount depending on demand, supply and liquidity . Investors using a demat trading account should therefore monitor the applicable price band, trading volume, bid-ask spread and NAV, particularly when markets experience sharp movements.
Frequently Asked Questions
What is the new price band for Equity and Debt ETFs?
They start with a ±10% band and can be widened in stages up to ±20%, subject to the prescribed conditions.
What is the price band for Gold and Silver ETFs?
Both start with a ±6% band and can be widened in 3-percentage-point increments.
What is the price band for Liquid and Overnight ETFs?
Both continue to have a fixed ±5% price band.
Why has SEBI changed ETF price bands?
The revised framework is intended to make ETF price bands more closely reflect current market conditions and improve price discovery, particularly when the underlying assets experience sharp movements.
Do the new rules mean ETFs will always trade at NAV?
No. ETFs can still trade at a premium or discount to their NAV because of market demand, supply and liquidity.
Disclaimer: This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.
