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New ETF Rules Boost Price Discovery from Sept 7
7 Sep
Summary
- New ETF trading rules start September 7, 2026.
- Base price now uses previous day's VWAP, not T-2 NAV.
- Price bands vary by ETF type, with gold/silver getting auctions.
The Securities and Exchange Board of India (Sebi) is implementing significant changes to ETF trading rules, effective September 7, 2026. These revisions aim to ensure ETF market prices more accurately reflect the value of their underlying assets, especially during volatile periods.
The new framework shifts the calculation of the base price from the Net Asset Value (NAV) of two trading days prior (T-2 NAV) to the volume-weighted average price (VWAP) of the ETF's trades during the last 30 minutes of the previous trading session.
Price bands have also been adjusted. Equity and debt ETFs will initially have a 10% price band, expandable to 20%, with cooling-off periods. Gold and silver ETFs will experience a tighter 6% band, which can be widened by 3% increments, and will also include a pre-open call auction to better align opening prices with demand and supply.
These measures are designed to enhance price discovery and market efficiency for ETFs. While the new rules aim for closer alignment with NAV, premiums or discounts may still occur due to market forces like demand and supply. The changes do not affect ETF returns, costs, or taxation.
