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Gold exchange framework: Sebi for trading in electronic gold receipts

The proposed denominations — reflecting underlying physical gold — of EGRs are 1 kilogram, 100 gram, 50 gram and subject to conditions, those can also be even for 5 and 10 gram, the markets regulator said in a consultation paper on the gold exchange.

By: ENS Economic Bureau | Mumbai |
May 18, 2021 6:40:51 am
The watchdog has come out with draft norms for vault managers and they will be registered as Sebi intermediaries.

The Securities and Exchange Board of India (Sebi) on Monday proposed an elaborate framework for setting up a gold exchange where the yellow metal will be traded in the form of electronic gold receipts (EGRs) and will help in having a transparent domestic spot price discovery mechanism.

The proposed denominations — reflecting underlying physical gold — of EGRs are 1 kilogram, 100 gram, 50 gram and subject to conditions, those can also be even for 5 and 10 gram, the markets regulator said in a consultation paper on the gold exchange.

The watchdog has come out with draft norms for vault managers and they will be registered as Sebi intermediaries.

The proposed gold exchange, encompassing the entire ecosystem of trading and physical delivery of gold, is extremely necessary to create a vibrant gold ecosystem in India which is commensurate with its large share of global gold consumption, according to Sebi.

Finance Minister Nirmala Sitharaman — in her budget speech for FY22 — had announced that the Sebi will be the regulator for gold exchange and the WDRA will be strengthened to set up the commodity market ecosystem.

India is the second largest consumer of gold globally, with annual gold demand of approximately 800-900 tonnes, and holds an important position in the global markets. Despite being second only to China in consumption of gold, India has remained only as a price-taker in global markets.

At present, India does not play any significant role in influencing the global price-setting for the commodity.

The proposed gold exchange would infuse transparency in gold transactions and over a period of time enable India to emerge as a global price setter for the commodity, Sebi said.

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