India's markets regulator on Monday proposed changes to how exchange-traded funds are priced for trading, seeking to narrow the gap between an ETF's base price and the value of its underlying assets.
Here are some key details:
* The Securities and Exchange Board of India said the base price used to set trading limits would be based on the volume-weighted average closing price in the last 30 minutes of the previous trading session
* If the ETF did not trade in that 30-minute window, the base price would be the last traded price from the previous session. If there was no trade in the ETF during the session, the base price would be based on the latest available net asset value
* SEBI also proposed dynamic price bands for equity and debt ETFs, with an initial limit of plus or minus 10% that could be widened to plus or minus 20% after a cooling-off period
* In February, SEBI had proposed using the previous trading day's indicative net asset value to calculate ETF price bands and replacing fixed limits with dynamic bands
* For silver and gold ETFs, which track commodities traded continuously in international markets, SEBI proposed a call auction to help determine an equilibrium price before trading begins
* The regulator had previously proposed removing the fixed bands entirely for silver and gold ETFs, with limits instead aligned with daily price limits applicable for derivatives contracts.
