SEBI Unveiled Risk Management Framework for Electronic Gold Receipts

The circular also provides detailed guidelines on each of the above mentioned requirements.

SEATTLE (Scrap Monster): The market regulator, the Securities and Exchange Board of India (SEBI) has announced introduction of a risk management framework for electronic gold receipts (EGRs) on recognized stock exchanges.

According to the latest circular, which has come into effect immediately, the EGRs will be created in exchange for physical gold deposited with a vault manager on the EGR segment, as soon as the spot gold exchanges begin operation.

SEBI Notified Trading Regulations for Electronic Gold Receipts

The liquid assets deposited by members must be adequate enough to cover mark-to-market losses on outstanding settlement obligations, value at risk (VaR) margins to cover potential losses for 99.9% of the days and extreme loss margins to cover special situations, as prescribed. These liquid assets cash, bank fixed deposits, bank guarantees with limits on exposure, government securities, mutual funds etc. The circular also provides detailed guidelines on each of the above mentioned requirements.

Also, SEBI noted that the Clearing Corporations will have all rights to impose additional risk containment measures, in addition to those mandated by the regulator. However, such measures could be introduced only to deal with situations not anticipated while designing the risk management system.