Trade Group Submit Blueprint of Spot Gold Exchange

SEATTLE (Scrap Monster): The steering committee of gold industry trade bodies has submitted a blueprint for the proposed spot gold exchange. The framework provides detailed outline on membership structure and product specifications, in addition to guidelines for setting up the exchange.

According to the committee, the spot exchange must have a tiered and flexible membership structure. It also recommends that all the members of the exchange must meet a minimum net worth requirement.

With regards to products offered by the exchange, the committee insists that the products should appeal to broad range of customers. At the same time, it should promote liquidity. It suggests initial spot contract with a T+1 settlement period. It suggests three contract sizes and fineness-1 kg of 995 fineness, 100 grams of 999 fineness and 10 grams of 999 fineness. The contracts should have minimum delivery size of 1 kg for kilobar contracts and 100 grams for the 100 grams as well as 10 grams contracts.

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The operations need to be supervised by a central regulator. The model portrays key roles for banks and vault operators. It recommends a blend of cash and gold clearing model in order to ensure liquidity and increased market participation.

The committee comprised of representative members from the World Gold Council, Indian Bullion and Jewellers Association, Gem and Jewellery Export Promotion Council, All-India Gems and Jewellery Domestic Council, Bullion Federation of India and the Indian Bullion Banking Association.