The BSE plans to seek market regulator SEBI’s approval to launch spot trade in bullion as well as offer futures trading in gold and currencies at its subsidiary India International Exchange (INX) in the Gujarat International Financial Tech (GIFT) City. At a conference organised by Indian Bullion and Jewellers Association (IBJA) in Mumbai, Ashishkumar Chauhan, Managing Director of BSE said that they have applied to Securities and Exchange Board of India (SEBI) to launch futures trading in gold and currencies at the exchange located at the International Financial Services Centre (IFSC).
Chauhan said that they would be soon applying for approval to launch spot trade in bullion, including gold and silver, at INX. He pointed out that the concept of launching a spot exchange was put forth by Shaktikanta Das, Secretary, Department of Economic Affairs, and the BSE took it forward by signing an agreement with IBJA for a joint venture in the exchange. He said that it was possible to have multiple exchanges.
Industry leaders discussed the demand for a spot exchange for the bullion in India. A panel comprising of representatives from institutions such as the BSE, Commodity Exchange - MCX, Kotak and researchers from Pahle India Foundation discussed the key challenges such as ensuring instant delivery of a commodity and financing it and transparency in the last mile. They argued that the government could encourage the setting up of a spot exchange, which is not common worldwide with the exception of Turkey, by trading imported gold on it. Prithviraj Kothari, MD of RiddiSiddhi Bullions, said that Turkey was a success because the government chose to sell imported gold through it and added that the Indian government too could support a spot exchange by doing the same.
BSE, Asia's oldest stock exchange, is the first to establish the country's first International Exchange at IFSC GIFT city in Gujarat. It signed an agreement with GIFT SEZ Limited in January 2015 to set up International Exchange and International Clearing Corporation at the GIFT IFSC. Built over an area of 880 acres, the Gujarat International Finance-Tec City is envisaged as an international hub for capital market trade.
India International Exchange IFSC Limited (India INX) and India International Clearing Corporation IFSC Limited (India ICC) are wholly owned subsidiary of the BSE Limited. The International exchange received final approval from Securities and Exchange Board of India (SEBI) on December 30, 2016. India INX was inaugurated by Prime Minister Narendra Modi on January 9, 2017.
Industry leaders at the event said that various presentations have been made to the government and they expected a positive outcome in the next 3-4 months.
The representatives also discussed setting up of a bullion bank, aided by government intervention and a Gold Policy stating a well-constructed roadmap for the sector. It was argued that perhaps one of the biggest hindrances was that the absence of financialisation of gold and the absence of a regulator in the sector.
The yellow metal is still not perceived as a financial asset in India. It plays various roles such as a commodity for consumption or investment, or as a currency or as a security, but doesn’t fit into the traditional definition of a financial asset. The RBI refraining from recognising it as a financial asset has added to the challenge, the panelists stated.
Aram Shishmanian, Chief Executive, World Gold Council (WGC), said that India accounts for 25% of the global gold market, and yet it does not have any say in the world market. He said that the demand is gradually shifting from the West to the East now, and India needs to put its act together and needs to step away from a fragmented market with outdated methods.
Sanjeev Agarwal, Chairman, FICCI Forum on Gems & Jewellery, pointed out that despite being a vital global player, there isn’t a single large Indian brand recognized in the global market.