SEBI will examine the issues due to which Electronic Gold Receipts (EGR) are not becoming an effective and acceptable benchmark for gold price discovery in India. This initiative is part of SEBI’s broader strategy to strengthen the commodities market ecosystem and increase participation in different commodities segments.
What is the meaning of Electronic Gold Receipt?
Electronic Gold Receipt i.e. EGR is a digital instrument, which represents physical gold. Its trading takes place in stock exchanges. It has been designed to create a transparent and efficient national spot market. Through this, investors can trade in gold in demat form. It is regulated by SEBI.
Obstacles in the path of acceptance of EGR will be removed
SEBI EGR Chairman Tuhin Kant Pandey said that the regulator is analyzing the structural, operational and regulatory challenges that are hindering the acceptance of EGR. One of the issues that are being considered in this regard is the impact of GST related issues. Market participants believe that this could stand in the way of liquidity and wider acceptance. Resolving these issues is necessary for EGR to play a larger role in gold price discovery in India.
EGR was recognized as securities in 2021
Pandey said these things in a program of Commodity Participants Associations of India (CPAI). The government laid the legal foundation for this framework by recognizing EGR as securities in December 2021. After this, SEBI started the gold exchange ecosystem through a circular issued on January 10, 2022. It includes a comprehensive framework including vaulting standards, EGR creation and redemption, role of intermediaries and risk management norms.
Expansion of commodities market is SEBI’s priority.
Despite this, activity in the market has been limited, due to which the regulator is again considering practical issues affecting participation and liquidity. Pandey also said that expansion of the commodities market is among the top priorities of the regulator. SEBI has formed two working groups to consider the old issues. The first group focuses on the challenges that exchanges, brokers and other participants face.
Steps will be taken to deepen the commodity derivatives market
The second group of SEBI is considering the concerns which have been expressed by Farmer-Producer Organizations (FPOs). Both working groups can offer data-based measures in their suggestions. These may include easing of restrictions on agricultural derivatives. SEBI is also talking to stakeholders. In July this year, SEBI had held talks with exchanges, clearing corporations, brokers, FPOs, domain experts and industry associations. Its objective was to set a policy and identify steps that would be necessary to deepen the commodity derivatives markets.