The Securities and Exchange Board of India (SEBI) on Friday extended the implementation deadline for its new trading framework for exchange-traded funds (ETFs) by six days to September 7.
The new rules were originally scheduled to come into effect from September 1, as proposed in SEBI's June 15 circular. The regulator said the deadline has been extended based on feedback received from stock exchanges and to ensure a smooth implementation of the new framework.
Under the revised timeline, market infrastructure institutions (MIIs), including stock exchanges and clearing corporations, will have additional time to put the required systems and processes in place. The MIIs will also be required to amend their rules, regulations and byelaws wherever necessary to implement the revised ETF framework.
SEBI had introduced the new framework in its June 15 circular with the objective of improving price discovery and trading in ETFs. The framework includes changes to the methodology for determining the base price of ETFs as well as the applicable price bands.
The changes are aimed at making ETF trading more efficient and ensuring that prices on exchanges better reflect the underlying value of the securities or assets held by the funds. The regulator's decision to provide additional time comes as exchanges and clearing corporations work towards operationalising the new requirements.
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One of the key changes under the new framework is the introduction of a pre-open call auction mechanism for commodity ETFs. The move is expected to help improve price discovery when trading begins and potentially reduce the impact of sharp price movements at the start of the trading session.
SEBI has also prescribed changes relating to close-out mechanisms for ETFs, adding another layer to the revised trading framework. The new provisions will require exchanges and other market infrastructure institutions to ensure their systems are aligned with the revised requirements before the framework takes effect.
With the deadline now pushed to Sept. 7, exchanges, clearing corporations and other MIIs have an additional six days to complete system changes and make the necessary amendments to their rules and byelaws. The extension is primarily aimed at ensuring that the transition to the new ETF trading framework takes place without operational disruptions.
The revised rules are part of SEBI's broader efforts to strengthen market mechanisms and improve transparency and efficiency in ETF trading, particularly around price discovery and the handling of trades at the opening and closing of market sessions.
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