The board of Sebi (Securities and Exchange Board of India ) on Tuesday cleared a proposal for setting up a gold exchange wherein the yellow metal will be traded in the form of electronic gold receipts and the bourse will help in having a transparent domestic spot price discovery mechanism.
The instruments representing gold will be called Electronic Gold Receipts (EGRs) and will be notified as securities, Sebi Chairman Ajay Tyagi said at a press conference after the board meeting. "EGRs will have the trading, clearing and settlement features akin to any other securities," he said. Any recognised 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 stock exchanges with the approval of Sebi.
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, Sebi said. According to the regulator, the exchange would be a national platform for buying and selling EGRs with underlying standardised 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," Sebi noted.