Stocks

SEBI mulls a spot bullion exchange in Mumbai

PALAK SHAH Mumbai | Updated on April 20, 2021

Move could overlap with GIFT City’s plans

Markets regulator SEBI is mulling a bullion spot exchange in Mumbai, a move that could clash with the plans announced by the Gujarat International Finance Tec-City (GIFT).

The Securities and Exchange Board of India (SEBI) was designated to regulate the spot bullion market in February by the Finance Minister in the budget speech. SEBI has held two meetings with the National Stock Exchange, the BSE, the Multi Commodity Exchange and the National Commodities and Derivatives Exchange so far to discuss the matter, sources told BusinessLine.

While MCX wants the spot platform in the same entity alongside its derivative platform, NCDEX wants a separate subsidiary structure, which other exchanges are not averse to, sources said.

India imports 800-1,000 tonnes of gold and 5,000- 6,000 tonnes of silver annually, worth over $30 billion. While there are exchange platforms to trade bullion futures, the spot market, mainly driven by jewellery sales, is still done over-the-counter (OTC).

Following China model

Experts say, while India is the world’s largest importer of bullion, it is powerless in setting the global prices.

China has a spot exchange for bullion known as the Shanghai Gold Exchange that has a benchmark called the ‘Shanghai Gold Fix.’ The government is thinking on the same lines of creating an Indian benchmark, sources said.

Currently, the gold pricing scenario in India is dominated by three organisations, including the Indian Bullion and Jewellers Association (IBJA), Gem & Jewellery Export Promotion Council (GJEPC) and Bombay Bullion Association (BBA). They act as self regulatory organisations and play a vital role in policies on spot markets.

Turf war

Industry watchers said that SEBI may be headed for a turf-war with the GIFTregulator. The NSE, BSE, MCX and NCDEX have already signed MoUs for setting up a spot bullion exchange in Gandhinagar. The India INX exchange has even got an approval. The GIFT regulator was planning on the lines of Shanghai exchange, which does both domestic and international trades on the same platform, the sources said. If a bullion spot exchange comes up in Mumbai, it is likely that international players will not be able to trade there initially as several policy changes will be required. But it is different for GIFT since it is an off-shore market and has permission for international players. Also, the entire ecosystem including delivery centres and hallmark agencies will have to be regulated by SEBI.

Published on April 20, 2021

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