SEBI: Electronic Gold Receipt to have Trading, clearing and settlement features akin to any Other ‘Securities’

The framework for the Gold Exchange and SEBI (Vault Managers) Regulations, 2021 has been approved by the Securities and Exchange Board of India (SEBI).

The gold-representing instrument will be known as a ‘Electronic Gold Receipt’ (EGR), and it will be classified as “securities” under the Securities Contracts (Regulation) Act of 1956. EGRs will have the same trading, clearing, and settlement features as other “securities.”

According to the press release, any recognised stock exchange, both existing and new, can begin trading in EGRs in a separate segment. The recognised stock exchanges, with the approval of SEBI, can determine the denomination for trading EGR and converting EGR into gold. The Clearing Corporation will settle stock exchange trades by transferring EGRs and funds to the buyer and seller, respectively. Because EGRs have perpetual validity, the EGR holder can keep the EGR for as long as they want. Upon surrender of the EGRs, the EGR holder may also withdraw the underlying gold from the vaults at his discretion. To reduce the costs of withdrawing gold from vaults, EGRs will be made “fungible,” and “inter-operability between Vault Managers” will be permitted.

The Vault Manager shall be a body corporate incorporated in India, according to the SEBI (Vault Managers) Regulations, 2021. A net worth of at least Rs. 50 crores is required for the Vault Manager. For the purpose of providing vaulting services for gold deposited to establish EGRs, the Vault Manager will be registered and regulated as a SEBI intermediary. Accepting deposits, storing and safeguarding gold, generating EGR, withdrawing gold, resolving grievances, and reconciling physical gold with the depository’s records will be among the responsibilities of the Vault Manager.

“The Gold Exchange, which encompasses the complete ecology of EGR trading and physical gold delivery, is projected to generate a thriving gold ecosystem in India, comparable with India’s considerable proportion of world gold demand. The Gold Exchange would be a national forum in India for buying and selling EGRs with underlying standardised gold, as well as establishing a national gold price framework. The Gold Exchange is intended to provide a slew of benefits to value chain participants as well as the broader gold market ecosystem, including efficient and transparent price discovery, investment liquidity, and assurance of gold quality, among other things, according to the SEBI.