{"id":57872,"date":"2022-04-25T11:45:51","date_gmt":"2022-04-25T06:15:51","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=57872"},"modified":"2022-09-13T15:34:21","modified_gmt":"2022-09-13T10:04:21","slug":"risk-management-framework-for-electronic-gold-receipts-segment","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/risk-management-framework-for-electronic-gold-receipts-segment\/","title":{"rendered":"Risk Management Framework for Electronic Gold Receipts (EGR) segment"},"content":{"rendered":"

The capital market<\/a> regulator of India i.e. the Securities and Exchange Board of India (SEBI) has come out with an elaborate risk management framework for Electronic Gold Receipts (EGR). The market watchdog has released a circular relating to Electronic Gold Receipts that covers various aspects, including margin collection, short-collection or non-collection of client margins, risk reduction mode and settlement, provision of early pay-in of funds for EGR.<\/p>\n\n\n\n

The circular will come into effect with immediate effect.<\/p>\n\n\n\n

What are Electronic Gold Receipts (EGRs)? <\/h2>\n\n\n\n

Electronic Gold Receipts<\/strong>[1]<\/strong><\/a><\/sup> are basically electronic receipts that are issued on the basis<\/a> of a deposit of underlying physical gold assets. These receipts are deposited with a gold manager for example a depository participant and then these receipts can be traded. These EGRs will then be traded on the Gold Exchanges in India. this would allow investor to trade in EGRs on both gold exchanges and stock exchanges.<\/p>\n\n\n\n

SEBI is responsible for regulating the entire ecosystem of the Gold exchange including the other activities such as vaulting, assaying gold quality and fixing delivery standards.<\/p>\n\n\n\n

Applicability of the framework for Electronic Gold Receipts: <\/h2>\n\n\n\n

The risk management framework for Electronic Gold Receipts is applicable to all the Managing Directors and Chief Executive Officers of all the Stock Exchanges and Clearing Corporations.<\/p>\n\n\n\n

Highlights of the Framework for Electronic Gold Receipts (EGR)<\/h2>\n\n\n\n

The Indian Government had previously notified “electronic gold receipts” as ‘securities’ under section 2(h)(iia) of the Securities Contract (Regulation) Act, 1956 via Gazette notification SEBI (Vault Managers) Regulations, 2021. SEBI also notified rules for the vault managers that paved the way for operationalization of Gold Exchange in India. <\/p>\n\n\n\n

Several other frameworks were issued by the SEBI<\/strong><\/a> pursuant to these notifications for the operationalisation of the gold exchange where the gold as a metal will be traded in the form of Electronic Gold Receipts.<\/p>\n\n\n\n

The whole transaction in this case can be divided into three stages right from creation of EGRs, trading of EGRs and finally conversion of the EGR into physical gold.<\/p>\n\n\n\n

According to the latest circular released by SEBI, the core of the risk management system is the liquid assets deposited by the trading members with Clearing Corporation.       <\/p>\n\n\n\n

Following are the requirements that these liquid assets will cover.<\/p>\n\n\n\n