With the government keen on setting up the gold spot exchange, the World Gold Council (WGC) is constituting a panel involving industry stake-holders to prepare a blueprint outlining the nitty gritty for implementing the plan.
"We are forming a committee that will include the bullion traders, banks, regulators among others, who will help in making a blueprint to help the government in its endeavour in setting a gold spot exchange in the country," WGC India Managing Director Somasundaram PR told PTI here.
WGC said in a report that a spot exchange can serve as a catalyst to organise the fragmented gold market in India, as it would bring together a number of key players across the gold value chain on the same platform, which will bring transparency in operations and improve tax accountability.
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"No single organisation has the mandate or ability to single-handedly drive this agenda. Therefore, it is paramount that there is close consultation, collaboration and coordination across industry stake-holders, market participants and regulators on the key design elements of the exchange," the report said.
Additionally, once the exchange is set up, market participants, such as wholesale bullion traders and large refiners, will need to play an active role in creating liquidity for the initial operations of the exchange, the report said.
It further said that building liquidity on an exchange is the fundamental challenge and determines its eventual success.
The product offering and operating model for the exchange needs to be designed in a way that it works for the market and offers tangible benefits for participants, the report said, adding that the participation from institutional players such as banks is crucial to the success of any exchange.
"For the gold exchange also, the participation from banks will be important to gain scale and build liquidity. However, due to the regulatory restrictions, banks cannot play an active role in the gold market.
These regulations include restrictions on buying and selling gold in the domestic market, participating in the futures market and launching gold linked products," it said.
As per the report, the taxation structure on exchange trading should not deter participation on the exchange.
As a result, the taxation norms may be adapted such that there is a level playing field with the over the counter (OTC) market, it added.
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