Plunge or Rise? SEBI Seeks Input on Reforming Base Prices and Price Bands for Stocks Across Multiple Exchanges

Plunge or Rise? SEBI Seeks Input on Reforming Base Prices and Price Bands for Stocks Across Multiple Exchanges​

SEBI has released a comprehensive consultation paper seeking public comments on crucial proposals aimed at standardizing the base price mechanism and price bands for scrips that are listed across multiple stock exchanges. This initiative seeks to mitigate significant price divergence observed in certain illiquid stocks when trading patterns differ between various exchanges.

The regulatory move directly addresses concerns regarding inconsistent pricing, which can potentially lead to a non-trading scenario on specific exchanges even when the general market is active. The paper emphasizes that the current mechanism relies on individual stock exchange closing prices, leading to complexity and risk.

Why Harmonization of Base Prices is Needed​

Currently, SEBI mandates scrip-wise price bands up to 20% either way for all stocks in compulsory rolling settlement, except those with available derivative products (Circular dated June 28, 2001). This provision was later expanded to include Index Derivatives (dated February 06, 2014).

The current system takes the previous day's closing price as the base for the pre-open session, and these price bands are uniformly applied by stock exchanges. However, a major gap exists in adjusting these bands on an exchange where no trading occurred on the preceding day.

As illustrated in the consultation paper, if one exchange maintains its 20% band while another sees persistent buy-side pressure, the closing prices for the identical scrip can diverge significantly across the different exchanges. This divergence presents a clear need for review and regulatory adjustment of the base price formula.

Proposed Solutions from SEBI's SMAC​

The necessity of reviewing these mechanisms was thoroughly discussed in the Secondary Market Advisory Committee (SMAC) meeting held during April 16-17, 2026. The Committee provided structured recommendations to ensure a smoother and more unified pricing mechanism across all exchanges.

One core recommendation established that if a scrip traded on at least one exchange or failed to trade on any exchange, the exchanges must use their respective latest closing prices for setting the Price Band and Base Price for the subsequent day's pre-open call auction.

Crucially, the SMAC proposed specific rules based on trading activity:
If the stock was traded only at one exchange, other exchanges must adopt that exchange's closing price. If it was traded on two or more exchanges, the exchange with the maximum trading volume should dictate the Price Band and Base Price for non-trading exchanges.

Key Proposals for Public Comment​

Following the SMAC deliberations and discussions with Stock Exchanges, SEBI has finalized four specific proposals that are now open for public review. These proposals seek a collaborative input from market participants before formal implementation.

Proposal 12.1 mandates that for scrips trading at all exchanges or those experiencing no trade on any exchange, exchanges must use their respective latest closing prices to fix the following day's price bands. This maintains internal integrity when divergence is not an issue.

For cases where a scrip traded only at one exchange, proposal 12.2 requires that other non-trading exchanges adopt the closing price from the active exchange for setting the Pre-open Call Auction Price Bands and Base Price.

In instances of multi-exchange activity where some exchanges failed to trade, proposal 12.3 stipulates that non-trading exchanges must anchor their pricing on the exchange that recorded the maximum volume for that scrip.

Implementation and Next Steps​

To guarantee seamless operational integration, Proposal 12.4 advises all stock exchanges to enter into necessary Agreements or Memorandums of Understanding (MoUs). These agreements are essential for ensuring the smooth sharing and synchronization of closing prices across different jurisdictions.

SEBI has invited public comments on this consultation paper until July 02, 2026. Stakeholders who wish to provide feedback on the harmonization proposal should submit their suggestions via the designated link on the SEBI website or by email to the specified addresses.