SEBI proposes uniform pricing for illiquid stocks across exchanges
Synopsis
SEBI wants to end a structural quirk where the same stock trades at two different prices on two different exchanges — a loophole that has long distorted price discovery in illiquid and small-cap securities. The fix sounds technical, but its impact on how thinly traded stocks are priced could be significant for retail investors caught on the wrong exchange.
Key Takeaways
SEBI released a consultation paper on 11 June proposing a uniform pricing mechanism for stocks listed on multiple exchanges.
Under the proposal, an inactive exchange must adopt the closing price of the active exchange — or the exchange with the highest trading volume — as its next-day pre-open base price.
The change primarily affects illiquid and small-cap stocks ; actively traded securities are expected to see little impact.
Exchanges would need to establish formal data-sharing arrangements for closing prices to implement the system.
Public comments on the consultation paper are open until 2 July .
The Securities and Exchange Board of India (SEBI) on Thursday, 11 June released a consultation paper proposing a new cross-exchange pricing mechanism to prevent the same stock from trading at materially different prices on different platforms. The proposal primarily targets illiquid and small-cap stocks that do not trade regularly across all exchanges.
The Core Problem SEBI Is Addressing
Under the current framework, each exchange independently calculates circuit limits based on its own previous closing price. When a stock goes inactive on one exchange while continuing to trade on another, the inactive platform's price and circuit bands freeze — creating two divergent market prices for the same security. This structural gap can restrict trading and distort price discovery for retail and institutional investors alike.
What SEBI Has Proposed
SEBI's consultation paper recommends that when a stock is inactive on one exchange but active on another, the inactive exchange should adopt the active exchange's closing price as the base price for the next day's pre-open session and apply price bands accordingly. The regulator stated: 'The previous day closing price of the scrip is taken as the base price for the pre-open session of a scrip and the price bands as discussed above are applicable on the said base price.'
Additionally, if a stock trades on more than one exchange but remains inactive on one of them, the inactive exchange should adopt the closing price from the exchange recording the highest trading volume. To operationalise this, exchanges would be required to establish formal arrangements for sharing closing-price data with each other.
Who Is Affected
The proposed changes are expected to have the most significant impact on illiquid and small-cap stocks that do not see consistent activity across all listed exchanges. Actively traded, large-cap securities are unlikely to be materially affected, as they typically maintain price parity across platforms through continuous arbitrage.
Broader Market Infrastructure Goals
SEBI framed the initiative as part of its wider effort to strengthen market infrastructure by improving price discovery and eliminating structural inefficiencies. Notably, this follows a broader regulatory push in recent years to tighten oversight of thinly traded securities, which have historically been susceptible to price manipulation and artificial circuit-limit exploitation.
If adopted, the mechanism could make trading in illiquid stocks more seamless for investors while reducing artificial price gaps and execution hurdles across exchanges.
Timeline and Next Steps
Public comments on the consultation paper are open until 2 July. SEBI will review stakeholder feedback before deciding on final implementation. Market participants, exchange operators, and investor associations are expected to submit responses ahead of the deadline.
Point of View
Creating arbitrage windows that sophisticated traders exploit at the expense of retail investors. SEBI's fix is technically sound, but the real test is enforcement — specifically, whether exchanges will build robust, real-time data-sharing pipes or treat the requirement as a compliance checkbox. The consultation deadline of 2 July is tight, and the devil will be in the implementation detail around which exchange qualifies as the 'highest volume' reference at any given point in time.
NationPress
30 Jul 2026
Frequently Asked Questions
What is SEBI's proposed uniform pricing mechanism for illiquid stocks?
SEBI has proposed that when a stock is inactive on one exchange but active on another, the inactive exchange should use the active exchange's closing price to set its pre-open base price and price bands for the next trading day. The goal is to eliminate divergent prices for the same security across platforms.
Why does price divergence occur in illiquid stocks across exchanges?
Currently, each exchange independently calculates circuit limits using its own previous closing price. When a stock stops trading on one exchange but continues on another, the inactive exchange's price and circuit bands freeze, creating two different market prices for the same security.
Which stocks will be most affected by SEBI's proposal?
The changes are expected to primarily affect illiquid and small-cap stocks that do not trade regularly across all exchanges. Actively traded, large-cap securities are unlikely to see a significant impact, as continuous arbitrage typically keeps their prices aligned.
What happens if a stock is inactive on one exchange but trades on multiple others?
SEBI has proposed that in such cases, the inactive exchange should adopt the closing price from whichever exchange recorded the highest trading volume on that day, ensuring the most representative price is used as the reference.
When is the deadline to comment on SEBI's consultation paper?
Public comments on the consultation paper are open until 2 July. SEBI will review stakeholder feedback before deciding on final implementation of the proposed mechanism.
