Gold and Silver ETFs Get New Trading Framework. (Image Source: iStockphoto) Investors planning to bet their Gold and Silver Exchange Traded Funds (ETFs) should prepare for a new trading environment from September 1, when the Securities and Exchange Board of India (SEBI) introduces a revamped ETF framework. The regulator's objective is to improve price discovery, enhance market transparency and provide stronger protection for investors. The upcoming changes are expected to significantly alter how commodity ETFs, especially gold and silver funds, are traded in India. One of the key concerns SEBI aims to address is the delay in reflecting overnight movements in global precious metal prices in domestic ETF trading. Gold and Silver ETFs often open with pricing gaps because international commodity markets continue to move even when Indian exchanges are closed. This can lead to temporary premiums or discounts in ETF prices. To reduce these distortions, SEBI has introduced a pre-open call auction mechanism along with dynamic price bands for commodity ETFs. The idea is to help domestic prices adjust more efficiently to global market developments before regular trading begins. Under the revised framework, Gold and Silver ETFs will initially trade within a ±6 per cent price band. If market conditions require greater flexibility, the band can be expanded in 3 per cent increments after a cooling-off period. A major departure from the current system is that there will be no upper limit on the number of times the price band can be widened during a trading session. SEBI has also changed the method for calculating the ETF reference price. From September 2026, the previous day's closing price, determined using the last 30 minutes' volume-weighted average price (VWAP), will become the benchmark for the next trading session. Market participants believe this could help reduce extreme premiums and discounts during periods of high volatility. Under SEBI’s revised ETF framework, Equity ETFs will operate with dynamic price bands that begin at ±10 per cent and can be expanded up to ±20 per cent if required. Debt ETFs will follow the same dynamic band structure. Liquid ETFs will continue to trade within a fixed ±5 per cent price band, while Overnight ETFs will retain the ±5 per cent limit, though their settlement mechanism will be modified. Commodity ETFs, including Gold and Silver ETFs, will see the most significant changes, with the introduction of a pre-open call auction mechanism and dynamic price bands starting at ±6 per cent, which can be widened in stages based on market conditions. SEBI's broader goal is to make India's ETF ecosystem more efficient, transparent and aligned with international standards. The reforms are also expected to improve liquidity and create a fairer trading environment for investors. However, experts continue to view Gold ETFs primarily as long-term portfolio diversification tools rather than instruments for aggressive short-term trading. Get Latest News live on Times Now along with Breaking News and Top Headlines from Business, Companies and around the world. She is working as a Chief Copy Editor at Times Now’s Business Desk, where she covers key developments in the stock market, Indian corporates across se... View More