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Friday, October 22, 2021

Sebi sets stage for spot gold trading on bourses, silver ETFs

These EGRs will have trading, clearing and settlement features of other securities such as stock options and stock futures. Any recognised stock exchange can launch EGR trading.

By: ENS Economic Bureau | Mumbai |
September 29, 2021 1:54:55 am
Sebi Chairman Ajay Tyagi along with members in Mumbai on Wednesday. (Express photo by Pradip Das)

The Securities and Exchange Board of India (Sebi) has paved the way for spot trading of gold in stock exchanges. Under its proposal, an instrument representing gold called ‘Electronic Gold Receipt’ (EGR) shall be notified as a security. Corporate entities registered with Sebi as vault managers will accept deposits of gold, store them and create these EGRs.

These EGRs will have trading, clearing and settlement features of other securities such as stock options and stock futures. Any recognised stock exchange can launch EGR trading. Investors can continue to hold EGRs in perpetuity if they so wish. They also have the option of withdrawing the underlying gold from vaults on surrendering these EGRs. To cut costs, Sebi has made these EGRs fungible i.e. an EGR created by one vault manager can be redeemed at any other vault manager.

Further, in a bid to bolster the start-up ecosystem, the Sebi board has relaxed the framework for superior voting (SR) shares for tech companies. This class of shares allow promoters or founders to retain control of their company even after selling ordinary shares to new investors. Companies are now allowed to file for an IPO three months after issuing SR shares to promoters, compared to 6 months earlier. Moreover, SR shareholders can be part of a promoter group having a net worth of less than Rs 1,000 crore, a relaxation from Rs 500 crore earlier. The regulator has also focused on corporate governance norms by tightening related party transactions (RPTs). Sebi has expanded the definition of related parties to include all persons and entities that are part of the promoter group irrespective of their actual shareholding. It has also classified persons and entities holding 20 percent or more shares during the immediately preceding financial year as a related party. From April 2023, this threshold will be lowered to 10 percent. It added firms should take approval of shareholders if the size of the related party transaction crosses a certain threshold; the said threshold is the lower of Rs 1000 crore or 10 percent of the annual consolidates turnover of the company.

Sebi has rationalised its delisting and mergers & acquisition regulations. Under the new framework, an acquirer wanting to delist the target firm must propose a higher price for delisting with a suitable premium over the open offer price. If the response to the open offer leads to 90 percent shares being acquired, all shareholders tendering shares shall be paid the same delisting price. If the response leads to the delisting threshold of 90 percent not being met, all shareholders who tender their shares shall be paid the same takeover price.

The board has also okayed the issuance of silver exchange traded funds and the setting up of social bourses. It has approved an Investor Charter, too.

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