New Delhi, June 11 -- The Securities and Exchange Board of India (Sebi) has proposed a new mechanism for stock exchanges to decide the price band and base price for the pre-open call auction to address price distortions that may occur when a scrip trades on one exchange but remains inactive on another.

In a consultation paper issued on Thursday, the market regulator said differing closing prices across exchanges for thinly traded stocks can lead to significant price divergence over time, potentially impacting price discovery and even causing a stock to stop trading on one exchange.

To address this, Sebi has proposed that, where a stock trades on all exchanges or remains inactive across all exchanges, each bourse may continue using its l...