New ETF rules in India: Capital markets regulator Sebi has brought revised rules for exchange-traded funds (ETFs) into force from September 7, changing how ETF prices are determined and how their price bands operate.
The new framework covers base prices, dynamic price bands, pre-open call auctions and close-out procedures. Sebi said the changes are aimed at improving price discovery and protecting investors.
What is the new base price for ETFs?
Under the revised rules, an ETF’s base price will be linked to its previous trading day’s closing price, calculated using the 30-minute VWAP at the end of the session.
If an ETF does not trade during the final 30 minutes, its last traded price will be used. If there was no trade on the previous day, the latest available closing NAV will become the base price.
Sebi and asset management companies will work towards using the T-1 closing NAV as the base price from April 1, 2027, after resolving operational issues.
Dynamic price bands for equity and debt ETFs
For equity ETFs and debt ETFs, excluding overnight and liquid ETFs, Sebi has introduced dynamic price bands.
Initial price band: ±10 per cent
The band can be expanded up to ±20 per cent
A 15-minute cooling-off period applies when prices move to or beyond 9.90 per cent of the base price.
If this happens during the last 30 minutes of trading, the cooling-off period will be five minutes.
The band can be widened by 5 per cent at a time, up to two times in the same direction.
Overnight and liquid ETFs will continue with a fixed ±5 per cent price band.
New rules for gold and silver ETFs
Commodity ETFs tracking gold and silver will have an initial dynamic price band of ±6 per cent.
The band can be expanded in stages of 3 per cent after a cooling-off period, depending on market movements.
Unlike equity and debt ETFs, there will be no upper limit on the price band for commodity ETFs and no cap on how many times it can be expanded during a trading session.
Pre-open auction for commodity ETFs
Sebi has also introduced a call auction in the pre-open session for commodity ETFs.
The move is intended to improve price discovery because gold and silver markets trade internationally and can remain active outside Indian market hours.
What changes for overnight and liquid ETFs?
Sebi has also revised the close-out price for overnight and liquid ETFs.
The close-out price will be the higher of:
The highest price recorded during the relevant settlement period up to the auction/close-out date; or
5 per cent above the latest available closing price on the day auction offers are invited.
The revised ETF framework came into force today, September 7, 2026.
Sebi had initially scheduled the changes to take effect from September 1, but on August 28 it extended the implementation deadline by one week to September 7.
