Sebi proposes price bands for gold and silver ETFs

MUMBAI: The unprecedented volatility in the prices of gold and silver in recent weeks has prompted markets regulator Sebi to have a closer look at the price bands and circuit filters for exchange traded funds (ETFs).

On Friday, Sebi proposed to put +/-20% price bands on ETFs on two precious metals, gold and silver. Part of the price band could also depend on the volatility in prices of these metals in the international markets, Sebi said. The regulator is also proposing graded price bands for ETFs on debt and equity indices, with a similar +/-20% range.

In the seven-page consultation paper, Sebi proposed an initial price band of +/-6% for gold and silver ETFs, which may be flexed up to +/-20% during the trading day subject to a cooling off period.

"After exhausting the initial price band there will be a cooling-off period of 15 minutes, thereafter the price band will be flexed by 3%. 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 exchange with a cooling-off period of 15 minutes. The single day maximum variation of +/-20% would be applicable," the consultation paper said.

Sebi is also proposing a similar price band for debt and equity ETFs.

"There can be a maximum of two instances of flexing in a day. The single day maximum variation of +/-20% would be applicable. One of the conditions for relaxing the price band is that a minimum of 50 trades should be executed with 10 unique UCCs (unique client codes) and three trading members on each side of the trade at or above 9.90% and so on," Sebi proposed.