NSE changes bullion ETF daily price range computing method

Mumbai: To work around the tricky problem of computing circuits of silver exchange-traded funds (ETFs), the National Stock Exchange (NSE) on Sunday changed its computation to trade minus one day (T-1) from T-2 . The change followed confusion after it emerged that the closing price of silver ETFs on Friday was higher than the lower circuit for Sunday's trades.

For instance, Kotak Silver ETF's lower circuit for Sunday, computed on a T-2 basis, was ₹291.65 a unit, which was above Friday's closing price of ₹286.93. This set the stage for massive confusion on Sunday until the exchange changed its methodology.

On Sunday, heavy selling pressure was expected after silver prices on MCX tanked 27% at 11.55 pm on Friday against silver ETFs' closing at 3:30 pm.

The bourse, however, said computation of the circuit would be at T-1. This change helped overcome the problem, said Satish Dondapati, fund manager at Kotak Mahindra MF.

Under the revised methodology, the lower circuit for Sunday was calculated at ₹256.11 based on Friday's net asset value (NAV) of ₹320.15.

Dondapati said the computation on T-1 was likely to continue through Monday, thanks to silver ETFs hitting lower circuits on Sunday.

Kotak Silver ETF plumbed 10.74% to hit the lower circuit, and the popular SilverBees also hit its lower circuit at ₹252.5.

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"In view of the volatility in underlying gold & silver prices, reference price for gold & silver ETFs traded on the exchange shall be based on the T-1 NAV as published by the respective mutual funds/asset management companies. Accordingly, the prescribed lower price band of 20% shall be applicable to the said T-1 NAV price for trading purposes. This change in methodology is applicable for today’s trading session," said the NSE circular on Sunday.

A fund manager added that, owing to thin volumes on Sunday, there could be more liquidation when markets trade on Monday.

Sunday's thin trading was reflected in volumes of silver ETFs. For instance, SilverBees' volume was ₹417.12 crore against the one-week average of ₹7511.5 crore.

Most investors couldn't get an exit as their silver units were locked at the lower circuit half-an-hour post-opening at 9 am.

SilverBees fell 29.86% from its record high of ₹360 on Thursday to Sunday's closing of ₹252.5 a unit. Kotak Silver ETF has tanked 34% to ₹256.11 a unit from Thursday's record high of ₹388.

Precious metals prices plunged on Friday because of a stronger dollar and US President Donald Trump nominating Kevin Warsh as successor to Jerome Powell whose term ends on 15 May.