BSE is ready with the technology to introduce electronic gold receipts (EGRs) on its platform. This will help create uniform price structure for the precious metal across the country.
Trading in EGRs will contribute to the existing programs for gold monetization such as Gold Monetization Scheme (GMS), Gold Bonds and Gold Deposits. While the tech is ready, BSE needs to take the required internal approvals and apply to Sebi for permission to launch the new class of security on its platform. The idea behind it is to give investors in India a transparent domestic spot price discovery mechanism.
Currently, India allows trading only in gold derivatives and Gold ETFs, unlike several other countries which have spot exchanges for physical trade in gold. The instruments representing gold will be called Electronic Gold Receipts (EGRs) and it will be notified as securities. EGRs will have trading, clearing and settlement features akin to other securities that are currently available in India. Like shares, these EGRs will be held in demat form and can be converted into physical gold when needed. To enable trading in physical gold, EGRs (backed by physical gold) will be traded and settled on stock exchanges.
The BSE chief business officer said that the entire trading will be done in three stages that include conversion from physical gold to EGRs, trading of EGRs and again conversion of EGR back to physical gold. To begin with, BSE may plan to launch EGR of 1 kg and 100 gm denominations and the same can be converted to physical gold. To attract retail investors, EGR with smaller denominations of 50 gm, 10 gm and 5 gm will also be launched in a phased manner.