SEBI Proposes New Pricing and Price Band Rules for Gold and Silver ETFs
The Securities and Exchange Board of India (SEBI) has proposed major changes to the way Exchange Traded Funds (ETFs), including gold and silver ETFs, are priced and traded. The proposal was released in a consultation paper on February 13, and public feedback has been invited until March 6.
Base Price to Use Latest Data
Currently, ETF prices are calculated based on the Net Asset Value (NAV) from two trading days earlier (T+2). SEBI noted that this creates a delay and may not reflect current market conditions accurately. Corporate actions such as dividends, bonus issues, or splits may also not be properly captured.
SEBI has proposed using T+1 day data instead. The base price could be determined using one of the following:
- Previous day’s closing trading price
- Average indicative NAV (iNAV) during the last 30 minutes of trading
- Previous day’s closing NAV, if available
This change will help ETF prices reflect the latest market movements more accurately.
New Price Band Limits Proposed
SEBI has also suggested revising the daily price band limits to better match market volatility:
- Equity and debt ETFs: Initial limit of ±10%, extendable up to ±20%
- Gold and silver ETFs: Initial limit of ±6%, extendable up to ±20% with cooling-off periods
- Overnight ETFs: Initial limit of ±5%
For gold and silver ETFs, if the initial ±6% limit is reached, a 15-minute cooling-off period will apply. After that, the limit may be extended further in stages, depending on market volatility.
Why This Matters for Investors
SEBI introduced these proposals following recent volatility in gold and silver prices. The current fixed limits sometimes prevent ETF prices from matching the actual value of underlying assets.
If implemented, the new rules will:
- Improve price accuracy
- Reduce pricing delays
- Enhance investor protection
- Ensure fair and efficient ETF trading
These changes are expected to benefit retail investors by making gold and silver ETF investments safer and more aligned with real market conditions.
