Norms for Base Price, Price Bands, Call Auction in pre-open session and Close-out procedure for Exchange Traded Funds (ETFs)
Summary
This circular establishes new norms for the base price, price bands, call auction, and close-out procedures specifically for Exchange Traded Funds (ETFs). It mandates that the T-1 day closing VWAP serve as the base price for ETFs to reduce lag associated with Net Asset Value calculations. The document introduces dynamic price band mechanisms for equity, debt, and commodity ETFs while maintaining fixed bands for overnight and liquid variants.
Text
The base price for determination of price bands of ETFs shall be T-1 day Closing Price i.e. last 30 minutes of Volume Weighted Average Price (VWAP) of the ETF.
In case there is no trading in the ETF during the last 30 minutes of T-1 day, then base price shall be the Last Traded Price (LTP) of the day. Further, in case there is no trade on T-1 day, then base price shall be the latest available closing NAV of the ETF.
The Base price shall be adjusted for corporate action(s), if any.
However, the Stock Exchanges and Asset Management Companies of Mutual Funds shall jointly address the operational challenges to implement the use of T-1 day closing NAV of the ETFs as the base price w.e.f. April 01, 2027.
For Equity ETFs and Debt ETFs (other than Overnight ETFs and Liquid ETFs), there shall be dynamic price bands, with an initial price band of +10%, which can be flexed upto +20% after a cooling off period.
The cooling off period shall be of 15 minutes after trades are executed at or above 9.90% and so on... If the trades are executed at or above 9.90% and so on, during the last 30 minutes of trading, then the cooling-off period shall be of 5 minutes.
The price band would be flexed by 5% of the base price after the cooling off period, for a maximum of two instances in one direction.
The price band shall be flexed only in the direction of the price movement without corresponding adjustment (sliding) of the band on the opposite side.
Flexing of price band for an ETF at one exchange shall be applicable for other exchanges.
Overnight ETFs and Liquid ETFs shall have a fixed price band of +5%.
For Commodity ETFs, there shall be dynamic price bands, with an initial price band of +6%. The price band would be flexed by 3% of the base price, after a cooling off period.
In case the price movement in the international markets is more than the aggregate Daily Price Limit (DPL) of +9%, the same may be further relaxed in stages of 3% by the Stock Exchange with the cooling-off period.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Norms for Base Price, Price Bands, Call Auction in pre-open session and Close-out procedure for Exchange Traded Funds (ETFs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.