Framework for operationalizing the Gold Exchange in India
Summary
This circular operationalizes the Gold Exchange in India by declaring electronic gold receipts as securities and outlining the regulatory framework. It establishes a three-tranche process involving the creation, trading, and physical conversion of Electronic Gold Receipts (EGRs). The document mandates specific roles for stock exchanges, depositories, clearing corporations, and vault managers to ensure market integrity.
Text
SEBI Board in its meeting held on September 28, 2021 approved the framework for Gold Exchange and SEBI (Vault Managers) Regulations, 2021.
Government of India vide Gazette notification S.O. 5401 (E) dated December 24, 2021, has declared “electronic gold receipts” as ‘securities’ under Section 2(h)(iia) of the Securities Contracts (Regulation) Act 1956.
The stock exchange/s desirous of trading in electronic gold receipts (EGRs) may apply to SEBI for approval of trading of EGRs in new segment.
The Exchanges are advised to: take steps to make necessary amendments to the relevant bye-laws, rules and regulations; bring the provisions of this circular to the notice of the members; communicate to SEBI, the status of the implementation.
The instrument for trading in Gold Exchange/Segment shall be referred to as ‘Electronic Gold Receipts’ (EGR) which has been notified as ‘securities’ under Section 2(h)(iia) of the Securities Contracts (Regulation) Act 1956.
New and existing recognized stock exchanges may launch and deal in EGRs, in a new segment.
The entire transaction has been divided into following three tranches: Creation of EGR, Trading of EGR on stock exchange/s, Conversion of EGR into Physical Gold.
A common interface will be developed by Depositories, which will be made accessible to all the entities i.e., Vault Managers, Depositories, Stock Exchanges and Clearing Corporations.
The supply of the physical gold, to be converted into EGR, shall be the fresh deposit of gold, coming into the vaults, either through imports or through stock exchange/s accredited domestic refineries.
The ‘gold’ which complies either with LBMA Good Delivery Standard or with the India Good Delivery Standard, or any other standard specified by SEBI, will be eligible under this framework.
The Vault Manager on receipt of physical gold shall record the relevant information in the common interface and create the EGR. The EGR shall be created at the behest of the depositor.
The Vault Manager shall ensure that no EGR is created without the presence of corresponding physical gold in its vaults.
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Source: SecMarx — Framework for operationalizing the Gold Exchange in India. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.