Biznextindia : The SEBI Board, at its meeting held on Tuesday has approved the framework for Gold Exchange and SEBI (Vault Managers) Regulations. The instrument representing gold will be called ‘Electronic Gold Receipt’ (EGR) and it will be notified as “securities” under Securities Contracts (Regulation) Act, 1956.
Salient features of the framework for Gold Exchange
EGRs will have the trading, clearing and settlement features akin to any other “securities”. Any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment. The denomination for trading of EGR and conversion of EGR into gold, can be decided by the recognized stock exchanges, with the approval of SEBI. The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller respectively.
The EGR holder can continue to hold the EGR as long as intended, since EGRs will have perpetual validity. The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs. To lower the costs associated with withdrawal of gold from the vaults, EGRs will be made “fungible” and “inter-operability between Vault Managers” will be allowed.
The Salient features of SEBI (Vault Managers) Regulations, 2021
The Vault Manager should be a body corporate incorporated in India. The Vault Manager should have net worth of at least Rs. 50 crores. The Vault Manager will be registered and regulated as SEBI intermediary, for providing vaulting services meant for gold deposited to create EGRs. The obligations of Vault Manager will include accepting deposits, storage and safekeeping of gold, creation of EGR, withdrawal of gold, grievance redressal and periodic reconciliation of physical gold with the records of depository.
The Gold Exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in India commensurate with India’s large share of global gold consumption. The Gold Exchange would be a national platform for buying and selling EGRs with underlying standardized gold in India and also create a national pricing structure for gold. The Gold Exchange is expected to offer a host of benefits for the value chain participants as well as for the entire gold market ecosystem, such as, efficient and transparent price discovery, investment liquidity, assurance in the quality of gold, etc.