Gold ETF

29th September, 2021 Economy

Figure 3: No Copyright Infringement Intended

Context:

Market regulator SEBI approved a range of new measures including frameworks for gold, social stock exchanges and introduction of silver Exchange Traded Funds or ETFs.

The instrument representing gold will be called 'Electronic Gold Receipt (EGR)' and it will be notified as "securities" under Securities Contracts (Regulation) Act, 1956.
EGRs will have the trading, clearing and settlement features akin to any other security instruments.
Any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment.
The denomination for trading of EGR and conversion of EGR into gold, can be decided by the recognized stock exchanges, with the approval of the market regulator.
The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller respectively.
The EGR holder can continue to hold the EGR as long as intended. The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs.

A clearinghouse is a designated intermediary between a buyer and seller in a financial market.
The clearinghouse validates and finalizes the transaction, ensuring that both the buyer and the seller honor their contractual obligations.

Initially SEBI was constituted in 1988 as a non-statutory body to deal with all the matters relating to regulation and development of the capital market.
It was granted statutory status under the SEBI Act 1992.

Regulation of Capital Market (both in the primary and secondary markets).
To register and regulate intermediaries in the capital market like brokers, subbrokers, trustees, underwriters, mutual funds.
To check malpractices in the securities' market, particularly in the Stock Exchange.
To promote investor education and awareness.
To protect the interest of the investor.