SEBI, vide its circular dated 10 January 2022, has notified the framework for operationalizing gold exchanges in India. The instrument for trading in the gold exchange/segment shall be referred to as ‘Electronic Gold Receipts’ (“EGRs”) which has been notified as a ‘security’ under the Securities Contracts (Regulation) Act, 1956. SEBI has simultaneously also issued SEBI (Vault Managers) Regulations, 2021 on 31 December 2021 to regulate the registration and operation of vault managers for the purposes of operationalising gold exchanges.
Stock exchanges desirous of trading in EGRs may apply to SEBI for obtaining approval for trading in the gold exchange segments. Trading in EGRs shall comprise of 3 (three) phases which shall include conversion of the physical gold into EGR by the vault managers registered with SEBI in the first phase. Pursuant to the conversion into EGRs, the stock exchanges
will allow trading of EGRs on continuous basis in the second phase. Subsequently, under the third phase the EGRs may be converted back into physical gold by the vault managers and the necessary intimations with respect to the extinguishment of the EGRs shall have to be provided to all the concerned stakeholders.
Further, to lower the costs associated with withdrawal of gold from the vaults, EGRs have been made fungible and interoperability between vault managers across the country has been allowed. To increase the reach of gold exchanges, all existing branches of vault managers will be allowed to operate as ‘collection and/or withdrawal centres’.
Clearing corporations shall also empanel assaying agencies to check the purity of gold, if required by the beneficial owner of the EGR, at the time of withdrawal of gold from the vaults and the charges for the same shall be borne by such beneficial owner.
Please click here to read the SEBI circular.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law al@acuitylaw.co.in
