SEBI issues framework for operationalizing gold exchanges in India

Circular no. SEBI/HO/CDMRD/DMP/CIR/P/2022/07, Dated: 10.01.2022

SEBI has laid out a framework for operationalizing the gold exchange, wherein the Gold will be traded in the form of electronic gold receipts (EGRs). SEBI specifies that the supply of the physical gold, to be converted into EGR, will be the fresh deposit of gold, coming into the vaults, either through imports or through stock exchange accredited domestic refineries. Vault managers will have to ensure that ‘gold’ to be converted into EGR meets the criteria.

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 EGRs shall have same trading features as available to “securities” defined under SCRA, 1956.

This whole process of trading will be executed in 3 tranches as follows:

First Tranche: Creation of EGR

Second Tranche: Trading of EGR on stock exchange/s

Third Tranche: Conversion of EGR into Physical Gold

Clearing Corporations shall empanel accredit assaying agencies for checking the purity of gold if required by the beneficial owner of the EGR at the time of withdrawal of gold from the vaults. However, the charges towards assaying, transportation, and assaying charges, shall be borne by such beneficial owner. Such assaying charges shall be disclosed upfront to the public at large.

The stock exchanges shall allow trading of the EGR’s continuously. Further, the Depositories shall share information about the creation of EGR/s, with the stock exchanges and clearing corporations periodically. The details of such periodicity shall be issued by SEBI in due course.

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