SEBI proposes uniform price band framework to curb price divergence in multi-listed stocks
New Delhi, June 12
Market regulator Securities and Exchange Board of India has proposed a harmonised framework for determining the base price for pre-open call auctions and the price band mechanism for securities listed on multiple stock exchanges, seeking to address price disparities in illiquid stocks and improve market efficiency.
In a consultation paper issued on Thursday, SEBI said the proposal aims to bring consistency in the treatment of securities traded across exchanges, particularly in situations where trading activity is absent on one or more exchanges.
Stock exchanges currently apply scrip-wise price bands independently using their respective previous-day closing prices. While the price bands are coordinated across exchanges, SEBI noted that "currently there is no mechanism to adjust the price bands on the stock exchange(s) where there is no trading on the previous day," which "may lead to progressive divergence" in prices of the same security across exchanges.
Highlighting the need for regulatory intervention, SEBI observed that in certain illiquid securities, prolonged non-trading on one exchange combined with persistent buying interest on another can result in substantial differences in market prices.
The consultation paper stated that "non-trading of scrip on one of the exchanges and a persistent buy side pressure along with the practice of application of price band on the previous day closing price has been causing significant price divergence in the closing prices of the scrips across the exchanges." It further noted that "such divergence also holds the potential of non-trading of the scrip on one of the exchanges."
To illustrate the issue, SEBI presented an example of a stock initially trading at Rs 100 on two exchanges. While the stock price gradually rose to Rs 160 on one exchange due to continued trading activity, the absence of trades on the other exchange kept its permissible trading range tied to an outdated closing price. As a result, the stock remained effectively capped at Rs 120 on the non-trading exchange, creating a significant pricing mismatch.
The matter was deliberated by SEBI's Secondary Market Advisory Committee (SMAC) during its meeting held on April 16-17, 2026. Based on the committee's recommendations and subsequent discussions with stock exchanges, SEBI has proposed a common methodology for determining price bands and base prices.
Under the proposed framework, if a security trades on all exchanges, or does not trade on any exchange, each exchange may continue to use its own latest closing price for determining the next day's price band.
However, where a security trades only on one exchange, all other exchanges would be required to use the closing price of the exchange where trading occurred for fixing both the price band and the base price for the next day's pre-open call auction session.
Further, in cases where a security trades on two or more exchanges but remains inactive on one or more others, the non-trading exchanges would adopt the closing price from the exchange recording the highest trading volume in that scrip for determining the subsequent day's price band and pre-open session base price.
To ensure seamless implementation, SEBI has also proposed that stock exchanges "execute necessary agreements/ MoUs or make necessary arrangements for sharing of the closing prices with each other."
SEBI has invited public comments on the proposals until July 2, 2026.
— ANI
Reader Comments
As someone who trades on both exchanges, this is a welcome change. The current system where illiquid stocks get stuck at outdated prices creates real opportunities for arbitrage but also huge risks for retail investors who don't understand the mechanics. Glad to see SMAC finally addressing this.
One concern: if we force all exchanges to use the highest volume exchange's closing price, won't that make the smaller exchanges irrelevant for these stocks? Already BSE has very thin volumes in many scrips. This could accelerate the concentration of liquidity on NSE. Need to think about competition, not just uniformity. But overall good intent. 👍
The example SEBI gave (starting at Rs 100, one exchange goes to 160 while other stays capped at 120) perfectly illustrates the problem. Imagine being a small investor holding that stock on the 'non-trading' exchange - you can't even sell at fair value. This harmonization protects retail investors more than anything. Well done SEBI.
Just curious - what about stocks that are suspended on one exchange but trading on another? That's another scenario they haven't addressed explicitly. Also, MoUs between exchanges for sharing closing prices should be a no-brainer that should already exist. Why is this only being proposed now in 2026? 🤷♀️
Good proposal. I just hope implementation is smooth. We've seen many SEBI circulars that look great on paper but create confusion at the broker level. They need to give exchanges and brokers enough time to adjust their systems. Also, what about the intra-day price band
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.