Gold has always been an essential part of the socio-economic-cultural ethos of every Indian. As an investment, it has always carried with it the tendency of invoking a sense of sentimental attachment. Despite its tremendous significance, gold investments did not keep pace in terms of ease of buying, storing, and safety. These factors motivated BSE to create a transparent and efficient investment mechanism for gold.
BSE’s role in developing India’s gold market:
BSE has been at the forefront of pursuing the case for EGRs. It has made several presentations to the government and regulators on the process workflow. This included interfacing with Shri Shaktikanta Das ji, the then secretary in the Ministry of Finance, and seeking the participation of banks, vaults, wholesalers, retailers, importers, exporters, etc. that forms the ecosystem. BSE’s first commitment fructified on October 1, 2018, when it became India’s first universal exchange by adding gold derivatives to its product portfolio. With a view to further widen and deepen the Bullion markets, on the suggestion of BSE, a framework to introduce ‘options on spot’ prices of commodities instead of futures prices was permitted. BSE launched the first ‘options in goods’ contracts on gold mini and silver kg based on spot prices from June 1, 2020. BSE became India’s first exchange to comply with the India Good Delivery Standard on its commodity platform by adopting Bureau of Indian standard (BIS) notified standards – IS 17278: 2019, for delivery of gold and silver. This was in line with the Prime Minister’s vision of ‘Make in India’ and ‘Aatmanirbhar Bharat’ of a self-reliant nation. With this step, BSE wished to highlight its commitment and priority towards its own good delivery standard and emerge as the price-setter instead of a price-taker in the bullion trade. BSE has also consistently executed seamless delivery of gold across all contracts in both LBMA and IGDS standards at its designated vault in Ahmedabad.
BSE has also played a pivotal role in the success of the India International Bullion Exchange (IIBX), where BSE’s wholly-owned subsidiary – BSE Technologies, is the technology provider. BSE’s subsidiary India INX and India ICC hold 20 percent stake in the IIBX.
Spot Trading in Gold:
BSE has made several presentations to the government and regulators on how the spot trading process in gold can work, and how the participants of various types including banks, vaults, wholesalers, retailers, importers, exporters, etc. will participate in this ecosystem. BSE was also part of Niti Aayog’s committee on transforming India’s gold sector, after which the Government of India, in the budget of 2018-19, announced its intent to establish a system of regulated gold exchanges in the country. Further, in the Union Budget 2021-22, Hon’ble Finance Minister Nirmala Sitharaman ji announced the setting up of a gold spot exchange, and that the Securities and Exchange Board of India (SEBI) will be the designated regulator for the proposed gold exchange. Subsequently, in its board meeting held on September 28, 2021, SEBI introduced two new investing instruments – electronic gold receipts (EGR) and silver ETFs. The instrument represents gold i.e., EGR, and will be having trading, clearing, and settlement features akin to other securities that are currently available in India. It is to a testament of SEBI that several new and innovative products including EGRs have been launched in a short time frame.
What are EGRs:
Currently, India allows trading only in gold derivatives and gold ETFs, unlike several other countries which have spot exchanges for physical trade in gold. Post approval from the SEBI board, Indian investors will soon see a new class of security known as EGR that will be available for trading on the stock exchanges like BSE. Like shares,.
