SEBI proposes forcing exchanges to sync price bands for multi-listed stocks, ending price divergence that traps holders of illiquid shares. Comments due July 2.
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India's securities regulator wants to end a pricing anomaly that lets the same stock trade at different values on different exchanges. The fix would force exchanges to sync price bands and base prices, closing a gap that has locked holders of illiquid shares.
SEBI released a consultation paper Thursday proposing a harmonized framework for determining the base price in pre-open call auctions and the price band mechanism for securities listed on more than one exchange. The problem is clear: when a stock trades on one exchange but not on another, the non-trading exchange keeps using its old closing price to set the next day's band. Over time, the gap widens.
SEBI illustrated with an example. A stock starts at ₹100 on two exchanges. On one exchange, trading continues and the price rises to ₹160. On the other, no trades occur. The price band on the quiet exchange stays anchored to the old ₹100 close, so the stock can only move within a range that caps it at ₹120. Same security, two prices.
"Currently there is no mechanism to adjust the price bands on the stock exchange(s) where there is no trading on the previous day," SEBI said. "This may lead to progressive divergence."
The regulator's Secondary Market Advisory Committee discussed the issue at its April 16-17 meeting. After talks with stock exchanges, SEBI landed on a three-part proposal. If a security trades on all exchanges or on none, each exchange can keep using its own latest closing price. If a security trades on only one exchange, all other exchanges must use that exchange's closing price for both the price band and the next day's pre-open call auction base price. If a security trades on two or more exchanges but is inactive on one or more, the inactive exchanges must adopt the closing price from the exchange with the highest trading volume in that scrip.
SEBI also proposed that exchanges sign agreements or memoranda of understanding to share closing prices with each other.
The proposal targets a real risk. For holders of illiquid stocks on the non-trading exchange, the divergence meant they could not sell at the price available on the active exchange. The band effectively locked them out. The new framework would eliminate that gap by forcing the quiet exchange to mirror the active one.
Traders who arbitrage across exchanges will lose one source of edge. The change reduces a structural risk that was hard to hedge. The consultation paper noted that "non-trading of scrip on one of the exchanges and persistent buy side pressure along with the practice of application of price band on the previous day closing price, has been causing significant price divergence."
SEBI has invited public comments on the proposals until July 2, 2026.
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