If you invest in Gold ETFs or Silver ETFs, an important change is coming your way.
The Securities and Exchange Board of India (SEBI) has announced a new trading framework for commodity exchange-traded funds (ETFs), which will come into effect from September 1.
The new rules are aimed at improving transparency, strengthening price discovery and ensuring that ETF prices remain closer to the actual value of the gold or silver they track.
What Is Changing for Gold and Silver ETFs?
Under the revised framework, Gold ETFs and Silver ETFs will begin each trading session with a pre-open call auction.
This system will help ETF prices adjust more quickly to overnight movements in global commodity markets.
Since gold and silver prices are influenced by international markets, the new mechanism is expected to make domestic ETF prices more accurate.
SEBI believes this will reduce the gap between ETF market prices and the actual value of their underlying assets.
New Dynamic Price Bands Introduced
The market regulator has also introduced dynamic price bands for commodity ETFs.
Initially, ETF prices will be allowed to move within a range of 6% above or below the reference price.
If market conditions require, the limit can be expanded in steps of 3% after a cooling-off period.
A major change is that there will no longer be a fixed cap on how many times the price band can be widened during a trading session.
This will allow ETF prices to respond better to sharp movements in global commodity markets.
How Will the Reference Price Be Calculated?
From September 1, the previous trading day’s closing price will be used as the reference price.
This closing price will be calculated using the Volume Weighted Average Price (VWAP) of the last 30 minutes of trading.
If there is no trading activity during the final 30 minutes, the last traded price of the day will be considered.
In cases where no trading takes place on the previous day, the latest available Net Asset Value (NAV) will be used as the reference price.
Another Major Change Coming in 2027
SEBI has also announced a further change that will take effect from April 1, 2027.
From that date, the closing NAV of one trading day before the trading session will become the base price for ETF trading.
Currently, stock exchanges use the ETF’s NAV from two trading days earlier (T-2) to determine the base price.
The regulator believes the new approach will provide more up-to-date pricing information.
How Will Investors Benefit?
According to SEBI, the revised framework will help reduce large premiums and discounts that sometimes occur in Gold and Silver ETFs during periods of high market volatility.
The new system is expected to improve price accuracy, increase transparency and bring domestic commodity ETF trading more in line with global market movements.
For investors, this could mean fairer pricing and a better reflection of real-time changes in gold and silver markets.
