The Centre will soon announce a separate regulator for spot exchanges, on the lines of SEBI.

The Finance Ministry has been trying to speed up the process of making spot exchanges operational, and the announcement on a new regulator is expected in the Interim Budget 2019-20, top sources told BusinessLine .

The Centre wants greater transparency in the price discovery of the physical bullion trading market, for which it is imperative to have spot exchanges. Currently, jewellers charge their own rates while buying and selling gold in the spot market, with little regulation. There is a marked difference between the bullion futures price and the spot price of jewellers.

Also, in most cases, the price and purity of bullion vary. Spot exchanges can potentially put the entire physical bullion market on an exchange platform.

For a while now the BSE and MCX have been showing willingness to launch spot exchange platforms, but none has taken off as there has been no decision on the regulator.

SEBI, first choice

SEBI was the first choice of the Ramesh Chand Committee, but the capital market regulator said that it may not be able to take up the task. Regulating spot exchange has become an issue post the NSEL fiasco.

SEBI had suggested to the Ramesh Chand Committee that it ought to look for a separate regulator for spot exchanges. Although the Committee was for SEBI handling spot exchanges, the Finance Ministry accepted SEBI’s recommendation for a separate regulator.

Full-scale bureaucracy

The new regulator is likely to have a full-scale bureaucratic set-up involving experts. It is expected to keep lobby groups — such as the World Gold Council and Indian Bullion and Jewellers Association, which have a direct vested interest in price discovery — out of the decision-making process, the sources said. Just like SEBI, the regulatory authority will have its own set of by-laws and penal provisions for wrongdoers and fraudsters.

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