The Indian market regulator, Securities and Exchange Board of India (SEBI) has proposed a framework for setting up a spot gold exchange, in a discussion paper released one week ago. The proposal was first announced by the Finance Minister Mrs Nirmala Sitharaman in the Union Budget this year.
SEBI has sought comments on allowing trading in quantities as low as 5 grammes; permitting multiple spot exchanges, incentivising trading on the exchange platform; and having a single gold price across the country with transportation cost adjusted as premium or discounted from traded price.
The paper said, “Setting up a new stock spot gold exchange has advantages such as single good delivery standard, reduced market fragmentation, improved liquidity, single reference price etc. However, it will be time-consuming, will require fresh investments in setting up a new stock exchange,” along with duplicating other processes and infrastructure and increase compliance cost.
To simplify trading, SEBI has proposed to convert physical gold into electronic gold receipt (EGR), which will be issued by regulated vault companies. At the time of delivery that receipt will again be converted into physical gold, said the paper. SEBI has also proposed regulating vault companies. SEBI has also sought comments on the minimum quantity of gold tradable.
The last date for submitting comments is June 18.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished
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