SEBI Proposes Stricter Price Bands for ETFs to Curb Market Volatility

Regulator Seeks Public Comments on New Framework for Exchange Traded Funds​

The Securities and Exchange Board of India has proposed a revised mechanism to regulate price movements in exchange traded funds as it seeks to rein in volatility in the ETF market. In a consultation paper issued on Friday, February 13, 2026, SEBI said it will examine the base price and price band framework applicable to ETFs and has invited public comments on the proposal.

The move could significantly alter trading dynamics in the ETF segment, particularly in commodities-linked funds such as gold and silver ETFs.

Existing Price Band Mechanism​

At present, individual scrip-wise price bands of up to 20 percent on either side are applicable to all securities in the rolling settlement segment, except those on which derivative products are available.

Restrictive price bands are also imposed on scrips under various surveillance measures. Additionally, market-wide circuit breakers of 10 percent, 15 percent and 20 percent are triggered based on movements in either the BSE Sensex or the NSE Nifty 50, whichever breaches the threshold first.

Volatility in Gold and Silver ETFs Triggers Review​

SEBI highlighted that during the last week of January 2026, sharp volatility in domestic and international gold and silver prices exposed gaps in the existing framework.

According to the regulator, the prevailing price bands for gold and silver ETFs, which were based on T-2 net asset value, became inadequate in ensuring that ETF market prices remained aligned with the value of their underlying assets.

To address the situation as an interim measure, exchanges adopted the T-1 day closing NAV or closing price as the base price for gold and silver ETFs. This approach was feasible due to a holiday between T-1 and T day, allowing the revised base to be used effectively.

Proposed Price Bands for Equity, Debt and Commodity ETFs​

Under the new proposal, SEBI has suggested an initial price band of plus or minus 10 percent for equity and debt ETFs. This band may be flexed up to plus or minus 20 percent during the trading day. A 15 minute cooling-off period will apply, and a maximum of two flexes will be permitted in a single session.

For gold and silver ETFs, the regulator has proposed a more conservative initial price band of plus or minus 6 percent, which may also be extended up to plus or minus 20 percent. These ETFs will similarly be subject to a 15 minute cooling-off period.

Potential Impact on the ETF Market​

The proposed framework aims to strengthen alignment between ETF prices and their underlying assets while reducing excessive volatility. If implemented, the changes are expected to reshape price discovery and trading behavior in equity, debt, and commodity-linked ETFs.

SEBI has invited feedback from stakeholders before finalising the new rules, signalling a potential shift in how ETF volatility is managed in Indian markets.