India’s capital markets regulator, SEBI, has proposed a new mechanism to harmonize price bands and pre-open auction prices for stocks listed on multiple exchanges.
According to a consultation paper released on Thursday, SEBI observed that illiquid stocks can develop significantly different prices across exchanges when trading occurs on one platform but not on another. Currently, each exchange independently calculates circuit limits based on its own previous closing price, which can lead to price distortions and trading inefficiencies.
To address this issue, SEBI has proposed a common framework. If a stock trades on only one exchange, all other exchanges where the stock remains untraded will use the closing price from the active exchange to determine the next day’s price band and pre-open auction base price.
In cases where a stock trades on multiple exchanges but remains inactive on others, the exchanges without trading activity will adopt the closing price from the exchange that recorded the highest trading volume.
The proposal, recommended by SEBI’s Secondary Market Advisory Committee, aims to improve price discovery, reduce price discrepancies, and ensure smoother trading across exchanges. SEBI has invited public comments on the consultation paper until July 2.
