Buying and selling of gold with delivery on a stock exchange platform is near to reality. Market regulator SEBI on Wednesday gave a go ahead to the BSE to launch trading in electronic gold receipts (EGR), paving the way for the exchange to launch spot bullion exchange.
The Finance Ministry has specified EGR as ‘securities,’ under the Securities Contracts (Regulation) Act 1956 and after SEBI’s go ahead to the exchange, BSE could be less than a couple of months away from launching the spot gold exchange. The Multi Commodity Exchange (MCX) will be BSE’s main rival in the space since it has plans to launch spot trading in commodities, especially bullion. But the exchange has suffered due to delays in being able to acquire a software for the spot bullion exchange.
Core strength
While BSE has launched commodity trading on its platform, it has still not been able to challenge MCX on its home turf in a manner that was anticipated by the markets, analysts say. Trading in bullion futures, crude and metals are the core strength of MCX that have remained unchallenged for nearly two decades now even though volumes have witnessed significant erosion. Analysts say the spot bullion platform awhen launched by the BSE will test its mettle and its iso-called technology superiority since it will have the first mover advantage in the segment. Spot bullion will enable the common public, jewellers and everyone who wants to buy physical gold bars to purchase it on an exchange platform with the transparency of rate and purity, which is often a suspect in the over the counter retail outlets.
The gold can be bought and stored in vaults until physical delivery is demanded. EGRs will take the form of shares lying in demat accounts. It will also boost the growth of demat accounts and make way for high financing deals by giving impetus to gold lending and borrowing via EGRs, analysts say.