GIFT City may have single bullion exchange after regulator's nudge

3 exchanges are working towards a common platform and also competing together for international biz

The International Financial Services Centre Authority, a unified regulator at the International Financial Services Centre (IFSC), has suggested a single bullion exchange at GIFT City, according to three persons in the know. 

Three exchanges — the India International Exchange (INX), a subsidiary of the BSE, the NSE’s International Exchange, and the Multi Commodity Exchange of India (MCX) — want to set up their own bullion exchange at GIFT City IFSC, but they are now reconsidering their plan.

INX executives are understood to have approached the officials of the other two exchanges after the unified regulator’s suggestion. Efforts are being made to bring at least two exchanges, if not all three, on the same platform. 

While the three can still submit independent proposals, the regulator may clear only one and hence, “all the three players are likely to come together,” said an industry player. However, he was of the view that some issues need to be sorted out to come on a single platform and compete together for international business.

In principle, according to the sources, all three have agreed to a single exchange and discussions currently are on over equity sharing and the role they seek to play in the proposed bullion exchange. 

In the domestic market, the MCX has the largest market share in bullion derivatives and is also the oldest in gold derivatives trade. Most jewellers, refiners, and stakeholders in the bullion industry have been hedging their requirements on the MCX. However, at the IFSC, the INX is the leader with significantly higher volumes. 

The NSE is a smaller player at the IFSC, but in domestic equities, it plays a key player with most foreign institutions active on its platform.

“Trading experience, investors base, and technology are crucial issues on which the exchanges are currently debating. The discussions also include what would be their share in proposed bullion exchange,” said one of the persons close to the development.

The regulator could not be reached for comment; the exchanges, too, did not reply. 

 The India Gold Policy Centre (IGPC) at IIM-A had earlier recommended setting up a bullion exchange at GIFT City IFSC, which is a finance special economic zone (SEZ). The IGPC has been actively pursuing a bullion exchange, among other gold policy issues. 

Since bullion exchange is a niche business for the IFSC, the regulator is going slow and safe for a sensitive commodity like gold. So far, one vaulting service providing company Sequel Logistics has started operations at GIFT City and its bullion shipments for the domestic market, imported at GIFT City IFSC, would start soon. The availability of a vaulting service provider within and outside the SEZ was considered a key issue by the IGPC for recommending the exchange at GIFT City.