Trading in the form of electronic gold receipts: SEBI
SEBI has issued several key guidelines for setting up a Gold Exchange on gold trading. These measures will help in making the policy of rates transparent in the domestic spot market. Accordingly, trading can be done in the form of electronic gold receipts. 1 kg, 100 gms, 50 gms, 10 gms, and 5 gms can also be traded electronically on electronic receipts (EGR) to reflect certain conditions.
Vault managers are required to register as SEBI Intermediaries. In India, which consumes a large amount of gold, it will help bring transparency in gold trading, physical delivery, etc., SEBI said.
The instrument to be traded on the Bors is called the ‘Electronic Gold Receipt’ (EGR). The regulator, however, suggested that the entire transaction mechanism could be divided into three parts.
According to SEBI guidelines, there are a total of three steps in the process of electronic receipt trading. First, an EGR, the equivalent value of physical gold, is created. To this end, SEBI has suggested that a joint interface could be set up for coordination between vault managers, depositories, stock exchanges, and clearing corporations.
In the second stage, the EGR is listed on the exchange. Depositories provide daily information in this regard to the exchanges. The transactions are settled by the clearing corporation.
Finally, in the third installment, the EGR is converted back into physical gold. The buyer must submit an EGR to obtain this.
Vault managers without gold in physical form in vaults .. would not be there to create EGR. SEBI has said that it may allow trading at both the 5 gram and 10-gram levels to attract more investors to the market.
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