Market Regulator Sebi Floats Proposal to Revamp ETF Price Band Framework

Why It Matters

Aligning ETF price bands with near‑real‑time NAV improves market efficiency and lowers the risk of mis‑priced trades, benefiting investors and issuers alike.

Key Takeaways

• SEBI suggests T‑1 NAV for ETF base price calculation.
• Uniform 20% band replaced by dynamic, asset‑specific bands.
• Equity/debt ETFs start at 10% band, can expand to 20%.
• Gold/silver ETFs begin with 6% band, cap 20% daily.
• Overnight ETFs retain fixed 5% price band.

Pulse Analysis

The current ETF pricing framework in India relies on a two‑day lag (T‑2) NAV to set base prices, coupled with a flat 20% price band for most funds. This static approach often creates a mismatch between the ETF’s quoted range and the actual volatility of its underlying securities, especially during periods of heightened market stress. Errors in adjusting for corporate actions further compound the risk, leading to wider-than‑necessary trading bands that can distort price discovery.

SEBI’s proposal seeks to modernise this system by anchoring the base price to more timely data—either the previous day’s (T‑1) closing price, the average indicative NAV from the last 30 minutes of trading, or the T‑1 closing NAV where available. In addition, the regulator introduces differentiated, dynamic bands: equity and debt index ETFs would start with a 10% band, expandable to 20% based on liquidity and cooling‑off periods; gold and silver commodity ETFs would begin at a tighter 6% band, with staged expansions but an overall 20% cap; overnight ETFs would retain a fixed 5% band. These measures aim to reflect real‑time market conditions while preserving safeguards against extreme volatility.

For market participants, the shift promises tighter alignment between ETF prices and their underlying assets, reducing arbitrage opportunities and enhancing investor confidence. Issuers will need to upgrade their NAV calculation and monitoring systems to accommodate T‑1 and iNAV inputs, potentially incurring short‑term costs. However, the dynamic band structure could improve liquidity by narrowing spreads during calm periods and providing flexibility during spikes. If adopted, the framework may set a benchmark for other emerging markets seeking to balance price stability with market responsiveness.

Market regulator Sebi floats proposal to revamp ETF price band framework

Regulator suggests linking ETF base price to T‑1 data and introducing dynamic bands to better align trading ranges with underlying asset volatility · By Abhishek Kumar, Mumbai · 2 min read · Last Updated: Feb 13 2026 · 7:14 PM IST

The Securities and Exchange Board of India on Friday floated a consultation paper proposing a comprehensive review of base‑price determination and price‑band norms for exchange‑traded funds (ETFs), citing concerns over mis‑alignment with underlying assets and operational risks under the existing framework.

At present, stock exchanges apply a uniform price band of 20 % on most ETFs — 5 % for overnight ETFs — using the T‑2 day closing net asset value (NAV) as the base price. Sebi said this practice creates an inherent one‑day lag, increases the risk of manual errors in adjusting for corporate actions, and may result in excessively wide trading ranges that do not reflect the volatility of the underlying securities.

Earlier this month, the T‑2‑based price bands had led to issues in gold and silver ETFs. Amid heightened volatility in the prices of the precious metals, the BSE on February 1 announced it would use T‑1 NAV for gold and silver ETF price‑band calculations.

To address this, the regulator has proposed shifting to a system linked to T‑1 day data. The base price on the trading day could be derived from either the ETF’s closing price on T‑1 day, the average indicative NAV (iNAV) of the last 30 minutes, or the closing NAV of T‑1 day, where available.

Using T‑2 NAV, Sebi said, often leads to price bands that are out of sync with actual market conditions.

In the consultation paper, Sebi has proposed differentiated and dynamic price bands for ETFs based on their underlying assets:

• Equity and debt index ETFs – an initial price band of 10 %, which can be flexed up to 20 % during the trading session subject to cooling‑off periods and liquidity conditions.

• Commodity ETFs linked to gold and silver – a tighter initial band of 6 %, expandable in stages depending on price movements in international markets, while retaining an overall daily cap of 20 %.

• Overnight ETFs – a fixed band of 5 %.

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First Published: Feb 13 2026 | 7:14 PM IST