- SEBI proposes mechanism to align prices of the same stock across exchanges
- Inactive exchanges to use active exchange closing price for next day's base price
- Proposal targets illiquid stocks with price divergence due to non-trading on some exchanges
India's market regulator, the Securities and Exchange Board of India (SEBI), has proposed a new mechanism to ensure the same stock does not trade at widely different prices across exchanges, seeking to improve price discovery and liquidity in thinly traded shares.
Under a consultation paper released Thursday, SEBI proposed that when a stock fails to trade on one exchange but trades on another, the inactive exchange should use the active exchange's closing price to determine the next day's pre-open base price and price band.
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At present, exchanges independently calculate circuit limits using their own previous closing prices. In illiquid stocks, prolonged periods of non-trading on one exchange can leave prices and circuit limits frozen, even as the same stock continues to move on another platform. The divergence can eventually restrict trading and create two different market prices for the same security.
SEBI said the proposal is aimed at addressing such anomalies and ensuring uniform price bands for stocks listed on multiple exchanges.
The regulator has also proposed that where a stock trades on more than one exchange but remains inactive on another, the inactive exchange should adopt the closing price of the venue with the highest trading volume. Exchanges would be required to establish arrangements for sharing closing prices to implement the mechanism.
The changes are expected to primarily affect illiquid and small-cap stocks that do not trade regularly across all exchanges, while having little impact on actively traded securities.
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The proposal reflects SEBI's broader effort to strengthen market infrastructure by improving price discovery and reducing structural inefficiencies that can hamper trading. Public comments on the consultation paper have been invited until July 2.
If adopted, the changes could make trading in illiquid stocks more seamless for investors while reducing artificial price gaps and execution hurdles across exchanges.
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