Scribd
Upload
55 views2 pages

Proposal For Gold Exchange

SEBI has proposed a framework to set up a spot gold exchange in India. Under the framework, entities can deposit physical gold with regulated vault managers and receive Electronic Gold Receipts (EGRs) that can be traded on exchanges. Owners can then surrender EGRs to vault managers to take delivery of the underlying gold. The exchange aims to create a vibrant gold market in India and establish a domestic gold standard and reference price, as India is a major global gold consumer. Key elements include fungibility between vaults and denominations as small as 5-10 grams.

Uploaded by

Suryakumar Bendalam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
55 views2 pages

Proposal For Gold Exchange

SEBI has proposed a framework to set up a spot gold exchange in India. Under the framework, entities can deposit physical gold with regulated vault managers and receive Electronic Gold Receipts (EGRs) that can be traded on exchanges. Owners can then surrender EGRs to vault managers to take delivery of the underlying gold. The exchange aims to create a vibrant gold market in India and establish a domestic gold standard and reference price, as India is a major global gold consumer. Key elements include fungibility between vaults and denominations as small as 5-10 grams.

Uploaded by

Suryakumar Bendalam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Proposal for Gold Exchange

drishtiias.com/printpdf/proposal-for-gold-exchange

Why in News
The Securities and Exchange Board of India (SEBI) has proposed a framework for
setting up a spot gold exchange.

The spot exchange is where financial instruments, such as commodities, currencies,


and securities, are traded for immediate delivery.
SEBI is a statutory body established in April, 1992 in accordance with the provisions
of the Securities and Exchange Board of India Act, 1992.

Key Points

1/2
Framework of Gold Exchange:
In the first tranche, an entity desirous of delivering gold, locally manufactured
or imported, on the exchange platform would have to approach a SEBI
regulated vault manager and deposit physical gold meeting quality and quantity
parameters with it.
Against this, the vault manager will issue an EGR (Electronic Gold Receipt),
which will be tradeable on the exchanges, in the second tranche.
A beneficial owner will surrender the EGR to a vault manager and take
delivery of the gold in the third tranche.
A common interface will be developed between vault managers, depositories,
clearing corporations and stock exchanges to enable seamless execution of
the three tranches.
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.
STT (Security Transaction Tax) will be levied on trading of the EGR and IGST
(Integrated Goods and Services Tax) at the time of delivery.
Other Issues Raised by SEBI:
This includes fungibility and interoperability between vault managers.
Fungibility means gold deposited under, say, EGR 1 can be delivered against
surrender of EGR 2 meeting the same contract specifications.
Interoperability means gold deposited at one location and with one vault
manager can be withdrawn from a different location of the same or different vault
manager, subject to availability of the physical gold. This will reduce the cost for
buyers.
Reason for Creating Separate Exchange for Gold:
To create a vibrant gold ecosystem in India which is commensurate with its
large share of global gold consumption.
India (after China) 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.
The objective behind setting up gold exchanges is for India to become a price
setter rather than a price taker and to establish an India good delivery
standard, akin to London Bullion Market Association (LBMA) accredited gold
bars.
Setting up a new stock spot gold exchange has advantages such as single good
delivery standard, reduced market fragmentation, improved liquidity, and single
reference price.

Source: TH

2/2

You might also like