Ready for BSE with the technology for launching gold electronic receipts

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The exchange will take the required internal approvals and ask the market regulator SEBI to launch the new security class on its platform.

With its technology, the leading BSE exchange is poised to introduce Electronic Gold Receipts (EGRs) on its platform, which will help create a uniform price structure for the yellow metal across the country, its director said on Sunday. Sameer Patil sales representative.

The exchange will take the required internal approvals and ask the market regulator SEBI to launch the new security class on its platform, he added.

It comes after SEBI on Tuesday approved a gold swap proposal, in which the yellow metal will trade in the form of EGR and help have a transparent mechanism for discovering domestic spot prices.

Currently, India only allows trading in gold derivatives and gold ETFs, unlike several other countries that have spot exchanges for physical gold trading.

Instruments representing gold will be called Electronic Gold Receipts (EGR) and will be notified as securities.

EGRs will have trading, clearing and settlement functions similar to other securities currently available in India.

“BSE, which is well known for its technological prowess, has been the main proponent of creating a transparent and efficient spot market for gold as it is a very important commodity for Indian consumers. “said Mr. Patil. PTI.

He further said that the exchange has been preparing the technology for a very long time in this market and is awaiting approval in principle so that it can go further.

The exchange had made several presentations to the government and regulators on how the process will work. How participants of various types including banks, safes, wholesalers, retailers, importers, exporters, etc. will participate in this ecosystem.

According to Mr. Patil, like the shares, these EGRs will be held in the form of demat and can be converted into physical gold if needed.

To enable physical gold trading, EGRs (backed by physical gold) will be traded and settled on an exchange.

Patil said the entire trading will be done in three tranches which include converting physical gold to EGR, trading EGR and again converting EGR to physical gold.

For starters, BSE can consider throwing 1kg and 100g EGRs and the same can be converted to physical gold. To attract retail investors, EGR with smaller denominations of 50g, 10g and 5g will also be phased in.

The source of supply of the physical gold to be converted into EGR will be the deposit of fresh gold, entering the vaults, either through imports or through national refineries accredited by the exchanges.

A customer can also convert physical gold to EGR by depositing physical gold at the designated delivery center. The exchanges will bring together VSPs based on guidelines prescribed by Sebi.

Likewise, customers can convert EGR to physical gold and the process is complete. An interface will be developed between the managers of (physical gold) safes, the depositaries (who hold the EGRs on deposit) and the exchanges and clearing companies which clear the transaction.

This move is expected to reduce existing market inefficiencies in bullion trading and could serve as a gateway to integrate spot gold trading with derivatives markets and create a transparent platform for bullion trading.

In addition, a single point of trading for both spot and derivative products would provide scale, liquidity and better pricing to all market participants by drastically reducing costs and cycle time.

Additionally, EGR trading will contribute to existing gold monetization programs such as the Gold Monetization Program (GMS), Gold Bonds and Gold Deposits.

In the Union budget 2021-2022, Finance Minister Nirmala Sitharaman announced the establishment of a spot gold exchange and Sebi will be the appointed regulator for the proposed gold exchanges.


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