After FM's announcement in the Union Budget 2021, spot gold trading on current exchanges would become a reality soon as there was iterated that SEBI would be administering such trades. This implies that trading in spot gold shall be carried out in a separate segment on current exchanges and vault receipts in respect of physical gold provided by the Warehousing Development and Regulatory Authority (WDRA) will be traded on exchanges as securities.
A leading online business portal in its report said, "the proposed trading of gold in spot may be allowed as commodity spot and commodity derivatives similar to other segments in any exchange like equity (cash) and equity derivatives", citing a source privy to the development.
"In such an event, a standalone gold exchange with dominant holding of primarily stakeholders from the industry may become difficult to establish or may not be found viable," the source added.
"Once the vaults (storing gold) come under the purview of WDRA, then in the case of gold settlement against the spot contracts, that may happen through receipts and these receipts will be treated as securities," added the portal in its report.
In the current regime, the WDRA has electronic negotiable warehouse receipts (eNWR) that are compulsory for delivery or settlement of agricultural commodities on stock exchanges. There shall also be enacted some changes in the Securities Contracts (Regulation) Act (SCRA) for allowing gold's treatment as a security and in the provisions for duration of contracts.
Sitharaman is scheduled to chair a SEBI meet on February 17 wherein she might discuss issues proposed in the Budget such as the establishment of a spot gold exchange. The FM may also look out for timelines for their implementation.