SEBI floats consultation paper on Gold Exchange - How will it work – Zee Business has IMPORTANT DETAILS

Securities and Exchange Board of India (SEBI) has issued a consultation paper on Gold Exchange and the market regulator has sought suggestions on the framework for Gold Exchange by 18 June 2021. Zee Business’ Brajesh Kumar Mishra has this detailed report on this.  

One of the points being deliberated in the consultation paper is whether there was a need to open a separate exchange for gold trading or should there be a separate segment in the existing exchanges, Mishra said. 

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If the existing exchanges are utilised, then the process could be swift, he said. The new exchange will require higher investment and time. But, a new exchange will give a better price reference, he said. He said that the liquidity situation could improve further along with the delivery system, he said. 

The consultation paper also seeks suggestions on the size of the trading lot – 5 gm, 10 gm, 50 gm and 1 kg. It also seeks opinion if the delivery should be on 50 gm at least as a lower size could incur a higher cost. This means that retail investors will have an opportunity to buy gold. 

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The consultation paper also suggests for interoperability between the vault managers. This is being suggested to facilitate the users to take delivery anywhere.  

The views are also invited on the tax structure. While levy of STT is being suggested while buying it from the exchanges, a GST levy is being suggested on the gold on physical delivery, Mishra said. 

Who can participate in this? 

Banks, FPIs, bullion dealers, jewellers, retail buyers, refiners can participate. Vault managers are also expected to play an important role.  

How this will be different from other exchanges?  

Mishra said that if this exchange is formed, investors will be able to take delivery like the shares. It is currently in the form of derivatives. It will be easier to buy it as one will be able to keep gold in his Demat account just like his shares. 

How will this work? 

Gold will go to the vault which will further generate an EGR or Electronic Gold Receipt. The depository will then issue an ISIN code after seeing that EGR. Just like the shares have an ISIN code, gold too will have an ISIN code, he further said. 

After this, it will be listed on the exchanges and will be traded. It will then be cleared by the Clearing Corporation. In case you want to take a physical delivery, the buyer will have to surrender the receipt at the vault.