SEBI Ratified Framework for New Gold Exchange

SEATTLE (Scrap Monster): The markets regulatory agency SEBI has approved the framework for new gold exchange that will allow customers to buy or sell gold in a manner similar to stocks.

The gold trade will be in the form of ‘Electronic Gold Receipt’ (EGR). The exchange will ensure transparency in spot fixing of gold prices. The framework proposes a secure mechanism to store physical gold equivalent to the EGR holding. Furthermore, the EGR could be exchanged for physical gold, if the customer wishes to do so.

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According to SEBI, existing exchanges could start a dedicated wing to handle EGR transactions. Alternatively, new dedicated exchanges could also be formed. The vault management system to handle physical gold could be started by interested parties capable of committing a capital investment of not less than INR 50 crore. It is compulsory that they must be registered with SEBI.

The EGR could be any of 1 gram, 5 grams or 10 grams denomination. The exchanges may charge handling fees from customers, the details of which were not disclosed by SEBI. The ease at which EGRs could be converted to physical gold or cash will ultimately determine the success of the scheme, industry experts said.

The proposed gold exchange is expected to bring in uniformity in gold prices across the country, apart from ensuring purity of gold and transparency in transactions.