Sebi proposes unified stock pricing framework across exchanges

The regulator has proposed a common framework for determining stock base prices and price bands across exchanges to address price divergence in illiquid securities

The Securities and Exchange Board of India (Sebi) has proposed a harmonised framework for determining base prices and daily price bands for stocks listed on multiple exchanges, aiming to reduce price divergence in thinly traded securities.

 

Under the proposal, if a stock trades on only one exchange on a particular day, all other exchanges would use that exchange's closing price to determine the next day's price band and pre-open call auction base price.

 

If the stock trades on more than one, but not all, exchanges, bourses where no trades occur would adopt the closing price of the exchange that recorded the highest trading volume. Where trading takes place on all exchanges—or on none—each exchange would continue to use its own closing price.

 

Sebi said the existing practice of exchanges independently applying price bands based on their own previous day's closing prices can result in significant price differences in illiquid stocks. In cases of sustained buy-side interest and an absence of trading on one exchange, such divergence can persist and further impair liquidity.

 

To facilitate the framework, exchanges may be required to enter into arrangements for sharing closing-price data.

 

The proposal follows recommendations made by the Secondary Market Advisory Committee after its deliberations in April.