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New ETF Trading Rules: If you trade or invest in Exchange Traded Funds (ETFs)—such as Gold ETFs, Silver ETFs, or Equity ETFs—this news is crucial for you. SEBI's new rules regarding ETF trading came into effect on September 7, 2026.

The primary objective of these new rules is to narrow the gap between an ETF's market price and its actual value (NAV), ensuring that investors receive a fair and reasonable price even during periods of high volatility.

Let’s understand in simple terms what the flaws in the old system were, what has changed under the new rules, and what you need to keep in mind while trading.

What was the major issue with the old system?

Until now, exchanges used the NAV from two days prior (T-2 NAV) to determine the base price of an ETF. Additionally, a uniform price band of 20% applied to all types of ETFs—whether Gold, Equity, or Bond ETFs.

Suppose an ETF had an NAV of ₹100 on Monday. On Tuesday, a significant rally in the global market pushed its actual value to ₹125. However, on Wednesday, the base price was still set based on Monday's ₹100 figure. Due to the 20% circuit limit, trading would halt at ₹120. While the rule was intended to protect investors, it prevented the ETF from reaching its true price of ₹125.

3 major changes effective from September 7

Under SEBI's new framework, three key reforms have been introduced:

1- Base price will no longer be based on data from two days ago

Instead of using the NAV from two days prior, the base price will now be determined based on the Volume-Weighted Average Price (VWAP) of the last 30 minutes of trading on the previous business day. In other words, today's trading limits will be determined by actual trading activity from the previous evening.

2- Separate circuit limits for different asset classes

Equity and Debt ETFs: The trading day will begin with a 10% price band. In the event of significant market volatility, the limit can be raised in stages up to 20% following a 15-minute cooling-off period.

Gold and Silver ETFs: An initial limit of 6% has been set for these. Since gold and silver trade 24 hours a day in global markets, their limits will continue to expand in increments of 3%—without an upper cap—to accommodate sharp overnight surges or drops.

Liquid and Overnight ETFs: These do not experience significant volatility; therefore, their band will remain fixed at 5%.

3- Pre-open auction for Gold and Silver ETFs

Similar to equities, gold and silver ETFs will now undergo a pre-open call auction before the market opens in the morning. This ensures that the very first order upon opening does not distort the price; instead, the correct opening price will be determined based on aggregate demand and supply.

(Note: These rules were originally scheduled to take effect on September 1, but SEBI postponed the implementation to September 7 to allow exchanges time to prepare their systems. From April 1, 2027, the base price will be determined by the previous day's closing NAV.)

What should investors do now?

Balkrishna Bagaria, founder of Sharp Financials, states that while SEBI's move has addressed system flaws, investors should still exercise caution while trading:

Check the iNAV: Before trading, visit the fund house's (AMC) website to view the live Indicative NAV (iNAV). This helps you verify whether the price you are quoting is appropriate.

Use limit orders: Always place limit orders instead of market orders, especially when the market opens and when trading gold or silver ETFs. Don't panic over a trading pause: If trading in your ETF is temporarily halted due to extreme volatility, it is simply a cooling-off mechanism working to determine the correct price.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.