SEBI clears norms for gold exchanges

Move will enable transparency in pricing, country will become ‘price setter’ in ecosystem, says Tyagi

September 28, 2021 10:36 pm | Updated 10:36 pm IST - Mumbai

COIMBATORE, TAMILNADU, 12/09/2014: Customs officials displaying the 3-kilogram gold bars seized from a passenger who arrived from Sharjah at the Coimbatore Airport, in Coimbatore, Tamilnadu. Photo: K. Ananthan

COIMBATORE, TAMILNADU, 12/09/2014: Customs officials displaying the 3-kilogram gold bars seized from a passenger who arrived from Sharjah at the Coimbatore Airport, in Coimbatore, Tamilnadu. Photo: K. Ananthan

The board of the Securities and Exchange Board of India (SEBI), on Tuesday approved the framework for a gold exchange as well as for vault managers.

These were proposals made in the last Union Budget.

The approval paves the way for gold exchanges to be set up for trading in ‘Electronic Gold Receipt’. (EGR) like in the case of other securities.

Existing stock exchanges will be allowed to provide the platform for trading of EGRs, SEBI said after the board meeting held in Mumbai on Tuesday.

The denomination for trading of EGR and conversion of EGR into gold will be decided by the stock exchange with the approval of SEBI, chairman Ajay Tyagi, said while addressing the media.

The clearing corporation will settle the trades executed on the stock exchanges by way of transferring EGRs and funds to the buyer and seller, respectively, he said.

EGR holders, at their discretion, can withdraw the underlying gold from the vaults after surrendering the EGRs.

SEBI-accredited vault managers will be responsible for the storage and safekeeping of gold deposits, creation of EGRs, withdrawal of gold, grievance redressal and periodic reconciliation of physical gold with the records of depository.

The vault manager will have a networth of at least ₹50 crore.

On the broader objective of such exchanges, , Mr. Tyagi said, “India is a net importer of gold. We are price takers and not price setters. The whole idea is to move from being price takers to be price setters. Price discovery at the exchanges will lead to... transparency in gold pricing.”

He added that the gold exchanges would provide transparent price discovery, investment liquidity and assurance in the quality of gold.

The SEBI board also approved an amendment to SEBI (Mutual Funds) Regulations 1996 to enable the introduction of Silver Exchange Traded Funds with certain safeguards in line with the existing mechanism for gold ETFs.

The market regulator also approved the framework for separate a Social Stock Exchange for listing of non-profit organisations and for-profit social enterprises that are engaged in 15 broad eligible social activities approved SEBI.

With this, social entities can raise funds via equity, issue of zero-coupon, zero-principal bonds, mutual funds, social impact funds and development impact bonds.

Social Venture Funds will be rechristened Social Impact Funds and can have a reduced corpus of ₹5 crore against ₹20 crore prescribed earlier, Mr. Tyagi said.

SEBI will now engage with Nabard, Sidbi and stock exchanges towards institution of a capacity building fund with corpus of ₹100 crore.

Bringing some changes in merger and acquisition norms, SEBI said if an acquirer wanted to delist a company, then he/she should offer a suitable premium over the open offer price.

If a company does not delist after the open offer and the acquirer has crossed the 75% holding mark, a 12-month cooling period will be allowed for making a second attempt using the reverse book-building mechanism. If it is still not successful, the acquirer will have to comply with the minimum public shareholding norms within one year, Mr. Tyagi said.

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