New Delhi: The leading national stock exchange is ready with its technology to introduce electronic gold receipts (EGRS) on its platforms, which will help in creating a uniform price structure of yellow metals throughout the country, said Business Officer Sameer Patil on Sunday.
Exchange will take the internal approval required and apply to market regulators for the launch of a new security class on the platform, he added.
This happens after the same board on Tuesday cleans the proposal for gold exchanges, where the yellow metal will be traded in the form of EGR and will help in having a transparent domestic domestic discovery mechanism.
At present, India allows trade only in gold and ETF gold derivatives, unlike some other countries that have spot exchanges for physical trade in gold.
The instrument that represents gold will be called electronic gold receipt (EGRS) and will be notified as securities.
EGRS will have trading, clearing and resolution features similar to other securities currently available in India.
“BSE, which is famous for its technological skills, has become the main supporter of creating a transparent and efficient spot market for gold because it is very important commodities for Indian consumers,” said Patil PTI.
He, further, said the Exchange is preparing technology for a long time in this market and is waiting for the same approval principle to take further.
Exchange has made several presentations to the government and regulators about how the process will succeed.
How participants are various types including banks, domes, wholesalers, retailers, importers, exporters etc.
will participate in this ecosystem.
According to Patil, such as shares, EGR will be held in the form of a demat and can be converted into physical gold if needed.
To activate physical gold trade, EGRS (supported by physical gold) will be traded and settled on the stock market.
Patil said that the entire trade would be carried out in three stages which included the conversion of physical gold to EGR, EGR trading and once again the conversion of EGR returned to physical gold.
To start, BSE can plan to launch EGR 1 kg and 100 GM denominations and the same thing can be converted into physical gold.
To attract retail investors, EGR with smaller denominations than 50 GM, 10 GM and 5 GM will also be launched gradually.
The source of physical gold supply that will be converted to EGR will be a new gold deposit, enter the safe, either through import or through an accredited domestic refinery stock exchange.
Clients can also change physical gold to EGR by depositing physical gold at the designated shipping center.
Exchange of Empanel Vault Service Providers (VSP) is based on guidelines prescribed by SEBI.
Similarly, clients can redeem EGR back for physical gold, and the process is complete.
The interface will be developed between Vault Managers (physical gold), deposit (which holds EGR in Demat) and stock exchange and clearing the company that clears trade.
This step is expected to reduce the inefficiency of the market in gold trade and can act as a bridge in integrating spot gold trading with the derivative market and making transparent platforms for gold trade.
In addition, one point trading for spots and derivatives will provide a better scale, liquidity and prices for all market participants by significant cycle costs and time.
In addition, trade in EGR will contribute to existing programs for gold monetization such as the gold monetization scheme (GMS), gold bonds and gold deposits.
In the Union 2021-22 budget, Minister of Finance Nirmala Sitharaman announced the arrangement of gold spot exchanges and SEBI would be the designated regulator for the proposed gold exchange.