SEBI Board approves framework for Gold Exchange and SEBI (Vault Managers) Regulations

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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.

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