GS Paper - 3 (Economy)

Markets regulator Sebi has notified rules for vault managers that allow bourses to set up a gold exchange in the country. This comes after the board of Sebi cleared a proposal in September for setting up a gold exchange, wherein the yellow metal will be traded in the form of electronic gold receipts and the bourse will help in having a transparent domestic spot price discovery mechanism.

What

  1. The instruments representing gold will be called electronic gold receipts (EGRs) and will be notified as securities.
  2. These EGRs will have trading, clearing and settlement features akin to any other securities.
  3. The gold exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in India.
  4. In a notification dated 31 December, the regulator said the vault manager will be registered and regulated as a Sebi intermediary for providing vaulting services meant for gold deposited to create EGRs.
  5. The obligations of the vault manager include accepting deposits, storage and safekeeping of gold, creation as well as withdrawal of EGR, grievance redressal and periodic reconciliation of physical gold with the records of depository.
  6. The vault managers are required to have systems for recording all transactions in electronic form pertaining to vaulting services.
  7. They need to maintain the documents to ensure that gold is traceable; details of storage, transfer and withdrawal of gold; purity, quantity and weight of deposited gold; and creation and extinguishment of EGRs.
  8. With regard to the creation of EGR, Sebi said every vault manager will have a common interface with the depository for the creation and extinguishment of EGR.
  9. The new norms to be called the Securities and Exchange Board of India (Sebi) Vault Managers rules have become effective from 31 December.