SEBI Announces New Trading Mechanism for Gold and Silver ETFs to Improve Price Discovery

The Securities and Exchange Board of India (SEBI) has introduced a revised trading framework for Gold and Silver Exchange Traded Funds (ETFs), which is scheduled to come into effect from 1 September. The regulatory changes are designed to improve market efficiency, enhance transparency in ETF pricing, and strengthen investor protection mechanisms in commodity-linked exchange traded products.

A key feature of the revised framework is the introduction of a pre-open call auction session along with dynamic price bands for commodity ETFs. These measures are intended to facilitate more accurate price discovery, particularly in Gold and Silver ETFs where domestic market prices may not immediately reflect overnight movements in international commodity markets.

Under the new system, ETF prices will be better aligned with prevailing global commodity trends before regular market trading begins. The pre-open auction mechanism will enable market participants to place and match orders ahead of the normal trading session, helping establish a fair opening price based on available demand and supply.

The introduction of dynamic price bands is expected to reduce excessive volatility and support orderly market functioning. By allowing prices to adjust within prescribed limits based on market conditions, the framework seeks to improve trading efficiency while maintaining adequate safeguards for investors.

The revised regulatory structure places commodity ETFs, particularly Gold and Silver ETFs, at the center of efforts to strengthen market integrity and align domestic trading practices with international standards. The changes are expected to support better market participation, improve transparency in ETF valuations, and enhance investor confidence in commodity-based investment products.