New Delhi, Feb. 17 -- The Securities and Exchange Board of India (Sebi) on Friday proposed sweeping changes to exchange traded funds (ETFs), aimed at eliminating a critical "pricing lag" that currently leaves investors exposed during volatile markets.

In a consultation paper that's open for comments until 6 March, the regulator suggested shifting the base price calculation for ETFs from a two-day-old value to the previous day's data.

Mint explains the proposed changes and what they mean for investors.

Sebi suggested that instead of using the net asset value (NAV) from two days earlier (T-2) to set price bands for ETFs, exchanges should use data from the previous trading day (T-1). To decide the base price for the next trading day, it h...