Sebi proposes changes to ETF trading norms

Mumbai: The Securities and Exchange Board of India (Sebi) on Monday proposed changes to the trading framework for exchange-traded funds (ETFs), introducing dynamic price bands, a new methodology for determining base prices and a pre-open call auction mechanism for commodity ETFs to improve price discovery and align trading limits with movements in underlying assets.

Sebi said the existing framework resulted in a one-day lag in ETF base prices, while the fixed price bands often failed to reflect the price range of the underlying assets.

It said, considering the operational challenges in usage of T-1 day closing NAV (net asset value) of the ETFs as base price, to start with, the base price for determination of price bands of ETFs would be T-1 day closing price, i.e. last 30 minutes of volume weighted average price (VWAP) of the ETF.