Sebi proposes common price-band mechanism for stocks listed on multiple exchanges

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In a consultation paper released on Thursday, the market regulator said it has observed instances where illiquid stocks develop significantly different prices across exchanges because circuit limits continue to be calculated using stale closing prices on exchanges where no trading occurs.

Currently, stock exchanges independently apply price bands based on their own previous closing prices. While this works smoothly for actively traded stocks, SEBI noted that it can create distortions in stocks that do not trade on one exchange for several days.

The regulator illustrated a scenario where a stock continues to hit upper circuits and gain value on one exchange, while remaining stuck within an outdated price band on another exchange due to lack of trading. Over time, this can lead to substantial price divergence between the same stock across exchanges and may even result in non-trading on one platform.

To address the issue, Sebi has proposed a harmonised framework for determining both the base price used in the pre-open call auction session and the applicable price bands.
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Under the proposal, if a stock trades on all exchanges or remains untraded on all exchanges on a particular day, each exchange will continue using its own latest closing price for calculating the next day’s price band.

However, if a stock trades on only one exchange, all other exchanges where the stock did not trade will be required to adopt the closing price from the exchange where trading occurred for setting the next day’s price bands and pre-open session base price.

In cases where a stock trades on two or more exchanges but remains untraded on one or more others, the exchanges without trading activity will use the closing price from the exchange that recorded the highest trading volume in that stock.

The proposals stem from recommendations made by Sebi’s Secondary Market Advisory Committee (SMAC), which discussed the issue during its April 2026 meeting.

Sebi has also proposed that stock exchanges enter into agreements or other arrangements to facilitate the sharing of closing-price data and ensure smooth implementation of the framework.

The regulator said the move is intended to improve price discovery and prevent unnecessary price distortions in stocks listed on multiple trading venues.

Public comments on the consultation paper have been invited until July 2.
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