Govt may accept SEBI proposal of sectoral regulator for gold spot exchange

The government plans to establish a new regulator to set up the gold spot exchange.

A committee appointed by the finance ministry had recommended the Securities and Exchanges Board of India (SEBI) regulates spot commodities. However, SEBI, in turn, proposed a separate sectoral regulator for the spot exchange which may be accepted by the government.

A source close to the development told Moneycontrol “Spot market dynamics are different from the commodity derivative market and SEBI was not comfortable regulating the gold spot exchange.”

SEBI told the committee it currently does not have the skill set required to regulate a spot market. Also, it does not regulate warehouses that come under the Warehousing Development and Regulating Authority (WDRA). In the commodity market, warehouses are like intermediaries, SEBI pointed out.

Another source told Moneycontrol “The new spot regulator might initially only regulate gold spot exchange. But in future, other commodities including base metal and agricultural commodities may also be part of this new spot regulator.”

The BSE and Multi-Commodity Exchange (MCX) have signed a memorandum of understanding with India Bullion and Jewellers Association (IBJA) to set up a bullion spot exchange. The BSE and IBJA had first proposed an online nationwide spot exchange in 2016. NSE is also exploring the option of a gold spot exchange.

A Finance Ministry-appointed committee, under the leadership of NITI Aayog member Ramesh Chand, had pointed out the importance of regulation in the spot market after the National Spot Exchange scam of Rs 5,600 crore in 2013. The committee submitted a report in February this year recommending that SEBI regulate the new gold spot exchange.