SEBI announced the trading features pertaining to the electronic gold receipts (EGR), which are electronic receipts issued on the basis of a deposit of physical gold.
The gold exchange, which is the ecosystem of trading of EGR and physical delivery of gold, would be a national platform for buying and selling EGRs issued against physical gold. SEBI would regulate the entire ecosystem of the proposed gold exchange.
SEBI Board in its meeting held on September 28, 2021 approved the framework for Gold Exchange and SEBI (Vault Managers) Regulations, 2021. The EGRs were later notified as ‘securities’ under the Securities Contracts (Regulation) Act 1956 in December 2021, paving the way for operationalization of Gold Exchange in India. Subsequently, framework for operationalizing the Gold Exchange in India were also issued.
Now, to specify the details of various aspects of the trading of EGR on the recognized stock exchange/s, guidelines covering trade timings, transaction charges by stock exchanges, block and bulk deal, price bands, Investor Protection Fund (IPF) & Investor Service Fund and Unique Client Code were issued by the regulator. Here are the key features
Trading hours
Trading in EGR segment shall be permitted from Monday to Friday. As per the SEBI Circular, the stock exchanges can set their trading hours within the time limit of 9:00AM to 11:30PM / 11:55PM.
On trading holidays, which will be decided by all stock exchanges jointly, the exchanges may permit trading in evening session – post 5:00 PM, in case corresponding internationally referenceable markets are open.
Duration
The pre-open session will be for a duration of 15 minutes – from 8:45 AM to 9:00 AM, out of which 8 minutes shall be allowed for order entry, order modification and order cancellation, 4 minutes for order matching and trade confirmation and the remaining 3 minutes shall be the buffer period to facilitate the transition from pre-open session to the normal market. The session shall close randomly during last one minute of order entry i.e. anytime between 7th and 8th minute of the order entry.
Price bands
With the view to ensuring orderly trading and protect market integrity, stock exchanges were asked by the regulator to implement a mechanism of price bands in the EGR segment. This is to prevent acceptance of orders for execution that are placed beyond the price limit set by the stock exchanges.
The initial price limit for the price band shall be set at 10% of the previous closing price. In the event of a market trend in either direction, the dynamic price bands may be relaxed by the stock exchanges in increments of 5%.
Stock exchanges shall take into consideration the price movement in international market while relaxing the price band.
Unique Client Code
For transactions in EGR segment, it is mandatory for all clients to have Unique Client Code (UCC). The stock exchanges shall not allow execution of trades without uploading of the UCC details. For this purpose, Permanent Account Number (PAN) issued by the Income Tax Department will be verified.
Guidelines for vault managers
In a separate circular, SEBI also Standard Operating Guidelines for the Vault Managers and Depositories pertaining to EGR segment. The Vault Managers are mandated for creation and extinguishment of EGR. The modalities for deposit of gold, creation of EGR, withdrawal of gold and extinguishment of EGR are stipulated in the said circular.
Never miss a story! Stay connected and informed with Mint.
Download
our App Now!!
