Sebi proposes trading in electronic gold receipts

New Delhi, May 17: Markets regulator Sebi on Monday proposed an elaborate framework for setting up a gold exchange wherein the yellow metal will be traded in the form of electronic gold receipts and will help in having a transparent domestic spot price discovery mechanism.

Also, the proposed denominations—reflecting underlying physical gold— of Electronic Gold Receipts (EGRs) are 1 kilogram, 100 grams, 50 grams and subject to conditions, those can also be even for 5 and 10 grams.

Apart from issuing a consultation paper on the gold exchange, the watchdog has come out with draft norms for vault managers and they will be registered as a Sebi intermediaries.

The proposed gold exchange, encompassing the entire ecosystem of trading and physical delivery of gold, is extremely necessary to create a vibrant gold ecosystem in india, the Sebi said.

Presenting the Budget for 2021-22, finance minister Nirmala Sitharaman had said that Sebi will be the regulator for gold exchange and the Warehousing Development and Regulatory Authority will be strengthened to set up the commodity market ecosystem.

"Establishment of regulated gold exchange is a landmark measure and to give due prominence to the historic step, it is believed that the terminology for the instrument should be unique and one that carries a global resonance," the Sebi noted.

The regulator has suggested that the instrument to be traded on the bourse can be termed as an 'Electronic Gold Receipt' (EGR) and that the entire transaction mechanism can be divided into three tranches.

In the first tranche, physical gold would be converted to EGR. The EGR will be listed for trading in the second tranche. In the third tranche, the EGR will be again be converted into physical gold and the owner will surrender the EGR to obtain the physical gold.