The onus to regulate the proposed exchange for spot gold has fallen on the Securities and Exchange Board of India. The statutory body currently regulates the equities market along with commodity futures market.
“In the budget of 2018-19, government had announced its intent to establish a system of regulated gold exchanges in the country. For the purpose, Sebi will be notified as the regulator and the Warehousing Development and Regulatory Authority (WDRA) will be strengthened to set up a commodity market eco system arrangement including vaulting, assaying, logistics etc in addition to warehousing,” Finance Minister Nirmala Sitharaman said in her budget speech.
Experts said a spot exchange for gold will benefit investors as it will lead to transparency and standardisation.
“A gold exchange is the need of the hour as many of the key market players are currently under-served by the current market structure and thereby stand at a disadvantage. The appointment of a regulator will now move things forward on this front,”said Chirag Mehta, senior fund manager at Quantum Mutual Fund.
He said the move will also benefit gold exchange trade funds (ETFs) by “adding to the liquidity pool as well as leading to more efficient price discovery.”
The FM also proposed to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts Regulation Act (SCRA), 1956 and Government Securities Act, 2007 into a rationalised single Securities Markets Code.
Experts said the move to introduce a uniform code will help ease compliance-related issues that arose out of dealing with multiple regulators and regulatory codes.
“The proposed consolidation would be a welcome change, since this may reduce the ambiguities and gaps between these different legislations which are interconnected and interdependent. This may also usher in much needed reforms and updates in the current landscape of securities regulations,” said Divaspati Singh, Partner, Khaitan & Co
The FM also proposed to introduce an investor charter as a right of all financial investors across all financial products.