SEBI proposes uniform price bands for stocks listed on multiple exchanges

Markets regulator SEBI has proposed a mechanism to reduce price mismatches in stocks listed on multiple exchanges, a move aimed at improving price discovery in thinly traded counters.The proposal comes after the regulator observed cases where certain stocks continued to trade on one exchange but saw no activity on another, resulting in wide differences in closing prices for the same security. Such divergences can distort price bands and, in some cases, make it harder for trading activity to resume on the exchange where the stock remains inactive.

Under the proposed framework, exchanges where a stock remains non-traded would, in certain situations, use the closing price from the exchange where trading took place to determine the next day’s price bands and pre-open call auction price.
If a stock trades on only one exchange, the other exchanges would adopt that closing price as the reference point for the following trading session. In cases where a stock trades on more than one exchange but remains inactive on others, the reference price would be taken from the exchange that recorded the highest trading volume in that stock.
However, where a stock either trades on all exchanges or remains non-traded across all exchanges, the existing practice of using each exchange’s own closing price would continue.SEBI said the changes are intended to address the absence of a mechanism for updating reference prices on exchanges where no trading occurs, a factor that can lead to progressively wider price differences across platforms.

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The regulator has also proposed that exchanges establish arrangements for sharing closing-price data to facilitate implementation of the framework.

SEBI has sought public comments on the proposals until July 2.