Multi Commodity Exchange (MCX) is planning to set up the country’s first bullion exchange at the International Financial Services Centre (IFSC) at Gift City in Gandhinagar, Gujarat. However, the IFSC’s newly appointed regulator may only allow a consortium to set up an exchange.
IFSCA, the regulator, is yet to announce regulations for a bullion exchange. A source close to the development told Moneycontrol: “MCX is looking seriously at opening a bullion exchange in IFSC. It is awaiting final regulations on bullion, which will be issued soon by the new regulator of IFSC.”
With the Centre having notified a Bullion Spot contract and Bullion Depository receipt under the IFSCA Act, 2019, sources say the regulator is looking at allowing a consortium for a bullion exchange rather than permitting individual/multiple exchanges.
“The regulator is not in favour of multiple bullion exchanges in the IFSC. They may come out with regulation on ownership (51 percent shareholding) of a company proposing to set up a bullion exchange. However, even then, an exchange can come up through a consortium,” a source told Moneycontrol.
However, if a consortium is encouraged, it needs to be seen how every member will get to hold a stake in such an exchange, whether a single participant will hold a majority, and whether such a group of participants can align their interests to make the bourse a success.
A source added that SEBI’s Stock Exchange and Clearing Corporation regulations also allow entities that propose to establish an exchange or depository a higher shareholding and sets the timeframe to reduce that shareholding.
“Exchanges need to think about nation building since they are competing with foreign exchanges. If several exchanges are set up with the same product then the objective of IFSC, which is to attract foreign investments and stop business from leaving India, will not be achieved,” the source added.
Speaking to Moneycontrol, Surendra Mehta, National Secretary, Indian Bullion Jewellery Association, said: “The success of an international bullion exchange will depend on elimination of nominated agencies — banks — which are currently permitted to import gold. Further, two-way movement of goods from Gift city by the domestic players will be essential for the success of the international bullion exchange.”
Efforts to set up a bullion exchange in India have been on for some years now. In 2015, the Indian Bullion Jewellery Association (IBJA) tied up with the BSE to set up a bullion exchange, but nothing came of it. Then, in 2018, IBJA tied up with MCX to set up a bullion exchange, which also could not go forward.