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Sebi issued risk management framework for electronic gold receipts

April 12, 2022

Sebi issued risk management framework for electronic gold receipts
Capital market regulator Sebi on Monday put in place an elaborate risk management framework for electronic gold receipts.

The watchdog has issued a circular pertaining to Electronic Gold Receipts (EGRs) that covers various aspects, including margin collection, provision for early pay-in of funds for EGR, short-collection, or non-collection of client margins, risk reduction mode, and settlement.
 
The circular will come into force with immediate effect. In December 2021, the government had informed EGRs as ‘securities’ under the Securities Contracts (Regulation) Act 1956. That very month, Sebi informed rules for vault managers paving way for operationalizing the gold exchange.
 
In accordance with the warnings, Sebi issued several frameworks for operationalizing the gold exchange, wherein the yellow metal will be traded in the form of EGRs.
 
The entire exchange has been divided into three tranches creation of EGR, trading of EGR on stock trade, and conversion of EGR into physical gold.
 
According to the latest circular, the core of the risk management system is the liquid assets deposited by trading members with the Clearing Corporation (CC).
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