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Context:

• The State Bank of India (SBI) announced that it has become the first bank to become a trading-cum-clearing (TCM) Member of India International Bullion Exchange at the GIFT City in Gujarat.

Detail

• This milestone enables SBI’s IFSC Banking unit (IBU) Gift City to conduct trades on the IIBX platform and settle them on behalf of its clients.
• RBI guidelines permitted branches of an Indian Bank in GIFT IFSC to act as a trading member (TM)/trading and clearing member (TCM) of IIBX.
• The central bank also allowed special category clients (SCC) which are nominated banks in India to import gold through IIBX.

Significance

• The entry of India’s largest bank into the field as a TCM is poised to boost trading volumes at IIBX.
• This step marks a change in India’s bullion market, ushering transparency, efficiency, and accessibility in the bullion trading market and solidifies SBI’s commitment to innovation and excellence in the financial sector.

Background: What is bullion?

• Bullion refers to physical gold and silver of high purity that is often kept in the form of bars, ingots, or coins.
• Bullion can sometimes be considered legal tender and is often held as reserves by central banks or held by institutional investors.

 

IIBX

• The India International Bullion Exchange (IIBX) is India's first bullion exchange, launched in 2022 in Gujarat.
• IIBX was launched in the GIFT International Financial Services Centre (IFSC). It is the 3rd exchange of its kind in the globe.

Prior to IIBX

• India’s bullion market is one of the largest in the world, the second largest in terms of consumption and holds an important position globally. However, it lacked organisation and structure.
• Gold is tightly regulated in India and earlier only nominated banks and agencies who were approved by the central bank could import gold and sell to dealers and jewellers.

Transition to IIBX

• IIBX is India’s first international bullion spot exchange that has been set up in GIFT-IFSC.
• It now allows qualified jewellers to import bullion and carry out transactions of the same on the exchange.
• IIBX is a “gateway for bullion imports into India”, wherein all the bullion imports for domestic consumption are channelised through the exchange.
• With its technology-driven solutions, IIBX has facilitated the transition of Indian bullion market towards a more organised structure by granting qualified jewellers direct access to import gold directly through the exchange mechanism.
• One kilo gold of 995 purity and gold mini in 100 gram and of 999 purity is traded at the IIBX.
• International Financial Services Centres Authority (IFSCA) is the regulator of IIBX.

Membership Categories

Trading Member (TM) This category of membership entitles a member to execute trades on his own account as well as on account of his clients but, clearing and settlement of trades executed through the Trading Member would have to be done through a Clearing Member. Trading Cum Self Clearing Member (TSM) This category of membership entitles a member to execute trades and to clear and settle the trades executed on his own account as well as on account of his clients. Trading Cum Clearing Member (TCM) This category of membership entitles a member to execute trades on his own account as well as on account of his clients and to clear and settle trades executed by themselves as well as by other trading members who choose to use clearing services of the member. Professional Clearing Member (PCM) A member only clears and settles trades of trading members of the Exchange who choose to clear and settle their trades through the Member.

 

PRACTICE QUESTION Q. Match the following: Category of Membership Description 1.Trading Member (TM) a)This category of membership entitles a member to execute trades on his own account as well as on account of his clients but, clearing and settlement of trades executed through the Trading Member would have to be done through a Clearing Member. 2.Trading Cum Self Clearing Member (TSM) b)This category of membership entitles a member to execute trades and to clear and settle the trades executed on his own account as well as on account of his clients. 3.Trading Cum Clearing Member (TCM) c)This category of membership entitles a member to execute trades on his own account as well as on account of his clients but, clearing and settlement of trades executed through the Trading Member would have to be done through a Clearing Member. 4.Professional Clearing Member (PCM) d)A member only clears and settles trades of trading members of the Exchange who choose to clear and settle their trades through the Member. Options: A. 1-D, 2-C, 3-A, 4-B B. 1-C, 2-B, 3-A, 4-D C. 1-A, 2-B, 3-D, 4-C D. 1-D, 2-B, 3-C, 4-A Answer: B. 1-C, 2-B, 3-A, 4-D