Stock exchange BSE has received final approval from the capital markets regulator Securities and Exchange Board of India (SEBI) for introducing the Electronic Gold Receipt (EGR) segment on its platform. The exchange had received in-principle approval from Sebi in February after which the exchange conducted several mock trading in the test environment for exchange members to facilitate trading in EGRs.
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The instruments representing gold will be called EGRs and will be notified as securities, with trading, clearing and settlement features similar to other securities that are currently available in India. Sebi board had earlier cleared a proposal for gold exchange, wherein the yellow metal will be traded in the form of EGRs and will help in having a transparent domestic spot price discovery mechanism. India currently has trading only in gold derivatives and gold ETFs, unlike several other countries which have spot exchanges for physical trade in gold.
According to BSE, EGRs will cater to all market participants, which means that buyers and sellers on the exchange shall include individual investors, as well as commercial participants along the value chain like importers, banks, refiners, bullion traders, jewellery manufacturers, and retailers.
Sameer Patil, chief business officer, BSE, said, “We are extremely thankful to Sebi for giving us the final approval and confidence that we will be able to launch the trading in EGR soon, as gold holds special significance for Indian households. BSE is confident, that the EGR platform will lead to greater assurance in the quality of gold supplied, efficient price discovery, and transparency in transacting. This can create a vibrant gold ecosystem in India by enabling actual fungibility of gold, which is the need of the hour.”
India is the second-largest consumer of gold globally with annual gold demand of approximately 800-900 tonnes and holds an important position in the global markets. BSE is working with all depositaries and vaults to ensure the development of the entire ecosystem around EGR trade including depositaries, vault managers, traders, bullion dealers, and jewellers so that EGRs will go a long way in building a transparent channel for gold trade on a national institutionalized platform.
India has remained a price-taker in the global markets, and at present, does not play any significant role in influencing the price-setting for the commodity. A platform for EGR infuses transparency in gold spot transactions, enables India to emerge as the price setter, and would eliminate existing market inefficiencies.
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