Sebi finalises framework for gold exchanges, vault managers

The Securities and Exchange Board of India on Tuesday proposed the framework for gold exchanges and Sebi Vault Managers. The following decisions were taken regarding the gold exchange.

Under the new framework, the instrument representing gold will be called ‘Electronic Gold Receipt’ (EGR) and it will be notified as “securities” under Securities Contracts (Regulation) Act, 1956.

Full trading

The EGRs will have the trading, clearing and settlement features akin to any other “securities”. 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 recognized stock  exchanges, with the approval of SEBI.

The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller, respectively.

The EGR holder can continue to hold the EGR as long as intended, since EGRs will have perpetual validity.

Fungible

The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs.

To lower the costs associated with withdrawal of gold from the vaults,  EGRs will be made “fungible” and “inter-operability between Vault Managers” will be allowed.

The Vault Manager should be a body corporate incorporated in India, should have net worth of at least Rs 50 crore and will be registered and regulated as SEBI intermediary, for providing vaulting services meant for gold deposited
to create EGRs.