The Securities and Change Board of India (SEBI), in session paper, has proposed introducing worth bands for exchange-traded funds (ETFs), notably specializing in Gold and Silver ETFs. The market regulator put ahead these measures in response to sharp fluctuations in international valuable metallic costs, pushed by ongoing macroeconomic uncertainty and geopolitical tensions. These elements have considerably impacted silver ETFs, with some experiencing worth declines of greater than 20 per cent a couple of days again in a single day, resulting in elevated volatility in efficiency and investor valuations.
Change Traded Funds (ETFs), primarily based on fairness or debt indices, are market-linked securities traded on inventory exchanges. Like MFs, they accumulate cash from traders and spend money on ETF, which in flip purchase index constituents via basket shopping for, with similar weightage of underlying index. The ETFs will be purchased each via direct (primarily based on NAV worth) or exchanges (the place they are going to commerce like fairness). For Gold and Silver ETFs, the underlying is the valuable metals. For every ETF investor, the AMC will purchase the silver or gold and maintain it in vaults by a delegated custodian appointed by the fund home.
SEBI’s rationale
The Securities and Change Board of India (SEBI) has noticed that sudden sharp will increase or decreases in international gold and silver costs can considerably disrupt buying and selling in home ETFs. These excessive worth actions are sometimes fuelled extra by speculative exercise than by precise underlying fundamentals. To advertise market stability and cut back the chance of panic-driven promoting or shopping for, SEBI has proposed the introduction of a calibrated circuit breaker mechanism.
SEBI has proposed an preliminary worth band of 6 per cent, both upward or downward, for Gold and Silver ETFs
If the 6 per cent threshold is breached, buying and selling might be suspended for quarter-hour. The cooling-off interval, based on SEBI, permits traders to reassess data and prevents panic-driven trades. After the cooling-off interval, the worth band could also be expanded in increments of three per cent, topic to strict monitoring circumstances.
If worldwide gold or silver costs transfer past the home each day threshold of 9 per cent, exchanges might loosen up limits in phases of three per cent, with a compulsory cooling-off interval every time. However, in no way can the worth of Gold or Silver ETFs transfer past 20 per cent in a single buying and selling day.
Stringent standards
Additional, to stop misuse of worth flexibility, SEBI has additionally proposed stringent buying and selling standards earlier than permitting additional rest past sure thresholds: Not less than 50 trades; Involving 10 Distinctive Shopper Codes; participation of three buying and selling members on each purchase and promote sides; and, the worth band might solely be flexed twice in a single buying and selling day, making certain tight regulatory management.
SEBI has additionally proposed making use of an identical graded worth band framework to debt and fairness index ETFs. One other proposal entails shifting the reference worth for ETFs from the present T-2 day NAV-based system to T-1 day metrics. The target is to take away the present one-day lag and align ETF buying and selling extra carefully with actions of their underlying property.
Little question these measures, if carried out, will defend retail traders from excessive swings and enhance worth discovery however might restrict arbitrage alternatives for intra-day merchants. Nevertheless, these framework may have little impression for long-term traders and, in reality, improve stability of their portfolio valuations.
Whereas free-market advocates oppose any worth controls, excessive market circumstances can justify decisive regulatory intervention. In time, as retail traders achieve a greater understanding of the hazards of short-term hypothesis and more and more undertake goal-oriented, long-term methods, regulators could possibly step by step get rid of such measures. Till that shift happens, warning and shut monitoring stay essential.
Revealed on February 20, 2026
