New ETF Framework Kicks In as SEBI Tightens Pricing Mechanism
What Happened
"SEBI's revised ETF trading framework has come into effect from September 7, changing how ETF prices and trading limits are determined. The new rules replace the earlier T-2 NAV-based reference price with a more market-linked base price, introduce asset-specific price bands, and bring pre-open auctions for certain ETFs, particularly gold and silver funds. The changes are aimed at keeping ETF prices closer to their actual underlying value, improving price discovery, and reducing distortions during volatile market conditions. However, ETFs can still trade at premiums or discounts to NAV, so investors should continue using limit orders and monitor indicative NAVs before trading."
Key Takeaways
The new rules should make ETF trading more efficient and transparent, especially for commodity and less-liquid ETFs, helping investors get prices that better reflect market realities.