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The Securities and Exchange Board of India (SEBI) has proposed a revised framework to harmonise the base price used for pre-open call auctions and price bands for stocks listed on multiple exchanges. The proposal aims to address price divergence observed in illiquid stocks when trading occurs on one exchange but not on another. Under the proposed mechanism, exchanges would use closing prices from actively traded venues to determine price bands and pre-open auction reference prices, ensuring greater consistency in stock pricing across trading platforms.
The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing changes to the mechanism used for determining base prices in pre-open call auction sessions and fixing price bands for stocks listed on multiple stock exchanges. The proposal seeks to address instances where differences in trading activity across exchanges result in significant price divergence for the same security.
SEBI noted that stock exchanges currently apply individual scrip-wise price bands of up to 20 per cent for securities that are not part of the derivatives segment. The previous day's closing price is used as the base price for the pre-open session and for determining permissible price movement limits in the subsequent trading session.
According to the regulator, challenges arise in the case of illiquid stocks that trade on one exchange but remain inactive on another. In such situations, the exchange where trading does not occur continues to apply price bands based on an outdated closing price, while the actively traded exchange updates its price bands according to the latest market price. Over time, this can lead to substantial divergence in stock prices between exchanges and may even result in prolonged non-trading of the security on certain platforms.
To address this issue, SEBI has proposed a harmonised framework based on recommendations made by the Secondary Market Advisory Committee (SMAC). Under the proposed mechanism, where a stock trades on all exchanges or does not trade on any exchange, each exchange will continue to use its own latest closing price for determining the next day’s price bands.
In cases where a stock trades on only one exchange, all other exchanges would adopt the closing price of the exchange where trading occurred for fixing both the price bands and the base price for the pre-open call auction session on the following day.
Further, where a stock trades on two or more exchanges but remains inactive on one or more others, the non-trading exchanges would use the closing price from the exchange recording the highest trading volume in that security for determining price bands and pre-open session reference prices.
To facilitate implementation, SEBI has proposed that stock exchanges enter into agreements or establish arrangements for sharing closing-price data with one another. The regulator has invited public comments on the proposals until July 2, 2026, before finalising the framework.
Source: SEBI
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