New Delhi: Market regulator SEBI has proposed a major overhaul of trading rules for gold and silver exchange-traded funds (ETFs) to better align their prices with international markets and protect investors from unintended losses. The move comes in response to persistent gaps between domestic ETF prices and global bullion rates caused by limited trading hours and fixed price bands in India.
Under the proposal, SEBI has suggested introducing dynamic price bands and a pre-open session for gold and silver ETFs, similar to the mechanism used in equity markets. The regulator has issued a consultation paper and invited public comments until March 2026, after which the framework will be finalised.
Why the change is needed
Globally, gold and silver are traded almost 24 hours a day, with prices moving continuously on international commodity exchanges. In India, however, ETFs can be traded only during stock market hours — 9:15 am to 3:30 pm — and within a fixed price band.
Because of this time gap, sharp overnight movements in global bullion prices often result in large price differences when Indian markets open. Investors are then forced to buy or sell at distorted prices, sometimes leading to avoidable losses. SEBI’s proposal seeks to reduce this mismatch and improve price discovery.
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Dynamic price band mechanism
The regulator has recommended replacing the current fixed band with a dynamic price band that can widen in stages during periods of high volatility.
The initial price band will be set at ±6% for the day.
If volatility persists, the band can be expanded in steps of 3%.
After each expansion, a 15-minute cooling-off period will be provided to stabilise trading and prevent panic buying or selling.
The maximum intraday movement allowed under the framework will be ±20%.
This staggered approach is intended to allow markets to adjust gradually to global price movements while maintaining order and liquidity.
Pre-open session to absorb global cues
SEBI has also proposed a pre-open trading session for gold and silver ETFs. The objective is to factor in overnight changes in international bullion prices before the regular market opens.
By allowing price discovery in a controlled pre-open window, the regulator aims to reduce sharp opening gaps and provide investors with a more balanced starting price.
Benefits for investors
The proposed framework is expected to:
- Improve alignment between domestic ETF prices and global bullion rates
- Reduce sudden price shocks at market open
- Enable fairer entry and exit points for retail investors
- Enhance liquidity and trading efficiency
Market participants believe the changes will strengthen the role of gold and silver ETFs as transparent and efficient investment vehicles, especially for small investors who rely on exchange-traded products instead of physical bullion.
Next steps
SEBI has sought stakeholder feedback on the proposal and will finalise the rules after reviewing industry and investor responses. Once implemented, the new mechanism could significantly improve price discovery and risk management in commodity-linked ETFs, bringing them closer to global trading standards.
