ETF trading rules from September 7: What changes for retail investors?

If there was no trade during the final 30 minutes on the previous day, the exchange will use that day’s last traded price. If there was no trade at all on the previous day, the latest available closing NAV will be used. The base price will also be adjusted for corporate actions, if applicable. From April 1, 2027, SEBI expects stock exchanges and mutual fund AMCs to use the previous day’s closing NAV as the base price after resolving operational issues.  

How will dynamic price bands work for equity and debt ETFs? 

Equity ETFs and debt ETFs, except overnight ETFs and liquid ETFs, will initially have a price band of ±10%.  The price range may expand in stages when the ETF moves sharply. If trades take place at or beyond 9.9% from the base price, a cooling off period will begin.  The cooling off period will generally be 15 minutes. If the trigger is reached during the last 30 minutes of trading, the cooling off period will be five minutes. Trading will continue within the prevailing band during this period.  After the cooling off period, the band can widen by 5% of the base price. This can happen a maximum of two times in one direction. Therefore, the band can expand from ±10% to ±15%, and then to ±20%.  

Example of dynamic price bands 

Suppose an equity ETF’s base price is ₹100. 

The band expands only in the direction of the price movement. If the price rises sharply, the upper band expands while the lower side does not shift upward. Similarly, if the price falls sharply, the lower band expands while the upper side remains unchanged.  

If an ETF’s price band is expanded on one exchange, the same flexing will apply on other exchanges as well.   For overnight ETFs and liquid ETFs, the price band will remain fixed at ±5%.  This is because these ETFs invest in short duration instruments and are generally expected to have lower price volatility than equity, gold or silver ETFs. 

How will gold and silver ETFs be priced? 

Gold and silver ETFs will begin each day with a dynamic price band of ±6%. The band can widen in stages of 3% after a cooling off period.  

The cooling off period is 15 minutes when the ETF trades at or beyond 5.9% from the base price. This period will be five minutes if that threshold is reached during the final 30 minutes of trading.   If international gold or silver prices move beyond the aggregate daily price limit of ±9%, stock exchanges may relax the band further in stages of 3%. Exchanges must provide appropriate notice to the market, including relevant details and justification.  Unlike equity and debt ETFs, gold and silver ETFs will not have an upper or lower cap on the price band. There is also no restriction on the number of times the price band can be widened during a trading session.  

What is changing for gold and silver ETFs? 

SEBI will introduce a pre-open call auction for gold and silver ETFs.  Gold and silver trade across international markets for longer hours, while Indian ETF trading is limited to domestic exchange hours. As a result, international commodity prices can move materially after Indian markets close and before they reopen.   A pre-open call auction will allow buy and sell orders to be collected before regular trading begins. The exchange will use these orders to determine an equilibrium price, which is the price at which the maximum possible number of buy and sell orders can be matched. 

Example of the pre-open process 

Suppose international gold prices rise overnight. Before regular Indian market trading starts, investors may place buy orders in a gold ETF. Sellers may also place their sell orders.  The call auction mechanism can use these orders to establish an opening price that reflects demand, supply and the overnight movement in global gold prices. This may support better price discovery at the start of the session.  The call auction mechanism will follow the existing SEBI framework for the pre-open session applicable to securities.  

What happens if ETF units are not delivered on settlement day? 

Close out is a settlement mechanism used when an investor sells ETF units, but the units are not available for delivery on the settlement day. If the exchange auction process is also unable to arrange the required ETF units, the transaction is settled through a close out process. This arises when a seller fails to deliver ETF units for settlement and the exchange auction process does not resolve the shortage. It is mainly a settlement and broker level matter. Most retail investors who maintain sufficient ETF units before placing a sell order may never encounter it directly. 

For overnight ETFs and liquid ETFs, the close out price will be the higher of the following: 

1. The highest price recorded in the ETF on that exchange from the relevant settlement until the auction or close out date
2. 5% above the latest available closing price on the exchange on the day auction offers are called 

For other ETFs, the existing close out provisions will continue.  

How will this affect retail ETF investors? 

For a long-term investor, there is no change in how an ETF is bought, held or sold. Investors will continue to place buy or sell orders through their broker during market hours.  The changes mostly improve the trading framework used by exchanges. Still, there are practical points worth knowing.  Using the previous day’s closing market price as the initial base price can make the trading range more current than the existing T+2 day’s NAV based reference.  This may be especially relevant for ETFs whose underlying assets move sharply, such as sector ETFs, gold ETFs and silver ETFs. Equity and eligible debt ETFs will begin with a smaller ±10% band, instead of the existing fixed ±20% band. But the range can widen gradually after the prescribed cooling off periods.  The framework is designed to avoid a sudden unrestricted price move while allowing trading to continue and the permitted range to expand when market conditions warrant it.  

Gold and silver ETF opening prices may better reflect global moves 

The pre-open call auction for gold and silver ETFs may make the opening price more reflective of overnight changes in international commodity prices.  However, investors should continue to check the market price against the ETF’s indicative NAV or NAV, where available. A gold or silver ETF can trade at a premium or discount to its underlying value due to demand, supply and liquidity conditions. 

Limit orders can be useful in volatile conditions 

A market order is executed at the best price available at that moment. During periods of sharp movement or low liquidity, the final execution price may differ from the price an investor saw before placing the order.  A limit order allows an investor to set the maximum buy price or the minimum sell price. This can be useful for retail investors trading less liquid ETFs or buying and selling during highly volatile sessions. 

For example, if an ETF is quoted near ₹250 but has a wide bid-ask spread, an investor can place a buy limit order at ₹250 or a preferred lower level instead of placing a market order. 

Why liquidity and spreads still matter 

The revised rules do not guarantee that every ETF will trade close to its NAV. Liquidity remains important. 

Investors should check the following before trading: 

1. Bid-ask spread
2. Trading volume
3. Market price versus indicative NAV or latest NAV
4. The ETF’s tracking difference and expense ratio
5. Whether the ETF suits their investment objective and risk appetite 

A narrow bid-ask spread, and adequate trading volume can help reduce the risk of purchasing at a large premium or selling at a sharp discount. 

From September 7, 2026, SEBI’s revised ETF framework will make the system for determining ETF base prices and price bands more responsive to recent trading conditions. Equity and eligible debt ETFs will move to dynamic bands beginning at ±10%, while gold and silver ETFs will begin at ±6% and receive a pre-open call auction mechanism. Overnight and liquid ETFs will continue to have a fixed ±5% band. 

For common retail investors, the core ETF investing process remains unchanged. The practical benefit is a more structured approach to sharp price moves and, for gold and silver ETFs, potentially better opening price discovery after international market developments. Investors should continue to use liquid ETFs, compare the traded price with NAV and consider limit orders when market conditions are volatile.