NSE Implements T-1 Circuit Computation for Silver ETFs to Resolve Trading Confusion
The National Stock Exchange (NSE) made a significant adjustment to its trading methodology on Sunday, shifting the computation for silver exchange-traded funds (ETFs) from trade minus two days (T-2) to trade minus one day (T-1). This strategic change was implemented to address a complex problem that emerged from discrepancies between closing prices and circuit limits, which had created substantial confusion in the market.
Addressing the Circuit Calculation Conundrum
The confusion began when it became apparent that the closing price of silver ETFs on Friday was actually higher than the lower circuit calculated for Sunday's trading session. For example, Kotak Silver ETF had a lower circuit of ₹291.65 per unit under the T-2 basis, which exceeded Friday's closing price of ₹286.93. This paradoxical situation set the stage for potential market disruption until the exchange intervened with its revised methodology.
On Sunday, market participants anticipated heavy selling pressure following a dramatic 27% plunge in silver prices on the Multi Commodity Exchange (MCX) at 11:55 PM on Friday. This sharp decline occurred well after silver ETFs had closed at 3:30 PM, creating a significant pricing gap that needed immediate resolution.
The Revised T-1 Methodology in Action
The bourse announced that circuit computation would now be based on T-1, a move that effectively resolved the problematic situation. Satish Dondapati, fund manager at Kotak Mahindra Mutual Fund, confirmed that this change successfully overcame the computational challenge. Under the new approach, Sunday's lower circuit was calculated at ₹256.11, derived from Friday's net asset value (NAV) of ₹320.15.
Dondapati further indicated that the T-1 computation method would likely continue through Monday's trading session, particularly since silver ETFs had already hit their lower circuits on Sunday. Both Kotak Silver ETF and the popular SilverBees experienced significant declines, with the former dropping 10.74% to reach its lower circuit and the latter hitting its circuit at ₹252.5 per unit.
Official Exchange Communication and Market Implications
In an official circular released on Sunday, the NSE stated: "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."
Market experts noted that Sunday's trading volumes were particularly thin, with SilverBees recording volumes of ₹417.12 crore compared to its one-week average of ₹7,511.5 crore. A fund manager suggested that this light trading activity might lead to further liquidation when markets resume normal operations on Monday.
Broader Market Context and Performance Metrics
The dramatic price movements reflect broader trends in precious metals markets. SilverBees fell 29.86% from its record high of ₹360 on Thursday to Sunday's closing price of ₹252.5 per unit. Similarly, Kotak Silver ETF declined 34% from Thursday's record high of ₹388 to ₹256.11 per unit.
These substantial drops in silver ETF values coincided with a broader plunge in precious metals prices on Friday, driven by a strengthening US dollar and significant political developments. The nomination of Kevin Warsh as successor to Jerome Powell by US President Donald Trump contributed to market uncertainty, with Powell's term scheduled to end on May 15.
The NSE's proactive adjustment to T-1 computation demonstrates the exchange's responsiveness to unusual market conditions and its commitment to maintaining orderly trading environments during periods of exceptional volatility in commodity-linked financial instruments.
