TaxTMI 
TaxTMI 
Master Circular for Electronic Gold Receipts (EGRs)
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....he issuance of the Master Circular. 4. Notwithstanding such rescission, 4.1. anything done or any action taken or purported to have been done or taken under the rescinded circulars, including registrations or approvals granted fees collected, registration suspended or cancelled, any inspection or investigation or enquiry or adjudication commenced or show-cause notice issued prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular, 4.2. any application made to SEBI under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular, 4.3. the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the rescinded circulars, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffect....
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....ng Corporations. 1.7.2. Supply of the physical gold: 1.7.2.1. The supply of the physical gold, to be converted into EGR, shall be the fresh deposit of gold, coming into the vaults, either through imports or through stock exchange/s accredited domestic refineries. 1.7.2.2. The existing deposit of gold lying in the vaults, which meets the aforesaid criteria and has never been out of the vaulting infrastructure, can be considered for conversion into EGR. 1.7.2.3. Vault managers shall ensure that 'gold' to be converted into EGR meets the aforementioned criteria. 1.7.3. Standard of gold: The 'gold' which complies either with LBMA Good Delivery Standard or with the India Good Delivery Standard, or any other standard specified by SEBI, shall be eligible under this framework. 1.7.4. First Tranche (r) Creation of EGR: 1.7.4.1. The Vault Manager on receipt of physical gold shall record the relevant information in the common interface and create the EGR. The EGR shall be created at the behest of the depositor (or owner of the gold) intending to convert physical gold into EGR. 1.7.4.2. The Vault Manager shall e....
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....ferent denomination for trading and /or conversion of EGR into gold. 1.11. Trading Features: EGRs shall have same trading features as available to "securities" defined under SCRA, 1956. 1.12. Fungibility and Inter-operability between the Vault Managers: 1.12.1. Fungibility means, the EGR's created by the Vault Manager/s, shall not be linked with the unique bar reference number of the physical gold, i.e., gold deposited against EGR1 can be delivered against conversion of EGR2 into gold (for the same contract specifications). 1.12.2. "Inter-operability between Vault Managers" means the physical gold deposited at one location of a Vault Manager, can be withdrawn from different location of same or different Vault Manager (depending on the availability of physical gold). 1.12.3. The aforementioned provisions would allow the Depositories to facilitate withdrawal of physical gold from the preferred vault location of the buyer, to the extent possible, and possibly, save upon the cost of withdrawal of gold from the vaults. 1.13. Withdrawal Center: To increase the reach of Gold Exchange (or EGR segment), all existing branches of vault managers may be allow....
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....nto consideration Central/State/Local holidays and notify the same, well in advance, to the market under prior intimation to SEBI. 2.1.4.2. On such trading holidays, stock exchanges may permit trading in evening session i.e. post 5:00 PM, in case corresponding internationally referenceable markets are open. 2.1.4.3. While finalizing trading holidays list, stock exchanges shall suitably consider the views of market participants. Frequent changes in holiday List shall be avoided i.e. once decided, same holidays should be followed every year irrespective of the holidays falling on a working day or a non-working day in that year. The holiday list for EGR should be in line with holiday list for derivatives markets to provide efficient hedging support. 2.2. Transaction charges by the stock exchanges 2.2.1. The stock exchanges shall ensure that transaction charges on the trades executed for EGR on their trading platform, must be equitable and in the interest of investors, as specified for cash segment in SEBI circular no. SEBI/HO/MRD2/MRD2_DCAP/P/CIR/ 2021/0000000591 dated July 5, 2021 and subsequent amendment or supersession thereto through any circular or m....
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.... order imbalance quantity (unmatched order quantity). The absolute value of the minimum order imbalance quantity shall be taken into consideration. Further, in case more than one price has same minimum order imbalance quantity, the equilibrium price shall be the price closest to the previous day's closing price. In case the previous day's closing price is the mid-value of a pair of prices which are closest to it, then the previous day's closing price itself shall be taken as the equilibrium price. 2.3.5.3. If equilibrium price is not discovered in pre-open session, then the orders entered in the pre-open session will be shifted to the order book of the normal market following time priority. The price of the first trade in the normal market shall be the opening price. 2.3.6. Order Execution: Pursuant to the discovery of price in the pre-open session, at the time of order execution, limit orders shall be given priority over market orders. The sequence for executing orders is given below: 2.3.6.1. Eligible Limit orders shall be matched with eligible limit orders. 2.3.6.2. Residual eligible limit orders shall be matched with market orders. ....
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.... implemented in respect of block deal window also. 2.5. Framework for Bulk Deals in EGR Segment 2.5.1. Market-wide limit: The Stock exchange shall calculate and disclose market-wide limit to be used for calculating bulk deals. For the purpose of this Circular, market-wide limit means summation of underlying gold, on which EGRs have been issued and outstanding, across all contracts floated by the stock exchanges. For example: There are 60 EGRs issued with 1kg each of underlying gold and 6000 EGRs issued with 100grams each of underlying gold. This means there is 660 kg of underlying gold in total for the EGR segment. 2.5.2. Bulk Deals: EGRs bought / sold representing 5% of the market-wide limit shall constitute bulk deal. 2.5.3. Disclosure: 2.5.3.1. The brokers shall disclose to the stock exchange the name of the contract, name of the client, quantity of EGR/s bought/sold and the traded price. 2.5.3.2. The disclosure shall be made by the brokers immediately upon execution of the trade. 2.5.3.3. The Stock exchange shall disclose aforesaid information on the same day after market hours to the general public. 2.5....
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....cial Institutions nominated Directors without any financial interest in the company. In such cases, when the Directors do not have any financial interest in the company, the position of such companies/corporates may not be clubbed just because they have common directors. 2.5.4.5. The above stated guidelines/ illustrations are indicative only. The Exchanges shall take suitable measures for clubbing of bulk deals on the basis of the criteria laid down above and also include other criteria such as PAN, patterns such as 'acting in concert' through common ownership and control structures, layering of transactions and any other relevant criteria to club open positions that may be observed during the course of regular monitoring and surveillance which may appear to compromise market integrity. 2.6. Price bands 2.6.1. With the view to ensuring orderly trading and protect market integrity, Stock exchanges shall implement a mechanism of price bands in the EGR segment to prevent acceptance of orders for execution that are placed beyond the price limit set by the stock exchanges. 2.6.2. The initial price limit for the price band shall be set at 10% of the previous....
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.... A. Standard Operating Guidelines for Vault Managers and Depositories 3.1. Financial Security Deposit (FSD) 3.1.1. Quantum 3.1.1.1. The Vault Manager shall furnish FSD of Rs. 10 lakhs to any one of the two Depositories (viz. NSDL or CDSL) before obtaining a certificate of registration from SEBI. This is the minimum amount of FSD which has to be maintained with the Depository at all points of time. 3.1.1.2. The FSD shall be either in the form of cash, bank fixed deposits or bank guarantees or any combination thereof, without applying any haircut. 3.1.2. Use of FSD 3.1.2.1. The Depositories shall put in place a procedure to utilize the FSD for compensating the aggrieved client, in the following situations: 3.1.2.1.1. for any such losses caused to a client that have been appropriately established by the Depositories against the Vault Manager; 3.1.2.1.2. in case of loss arising from any action or inaction of the Vault Manager that prevents the client from exercising, in whole or in part, their rights while availing vaulting services. 3.1.2.2. In case of utilization of FSD by the Depositories, in part or full,....
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....lt Manager shall ensure the following with respect to the recognized vaults: 3.3.1.1 The recognized vaults shall be under the absolute control of the Vault Manager. In case of a leased property, the Vault Manager shall hold a direct lease for at least three years and it shall be ensured that no third party including the owner/lessor of the recognized vault has any role to play in the operations of the said recognized vault. 3.3.1.2 The recognized vaults are well connected with rail and/or road networks and have sufficient space for parking and movement of loading/ unloading vehicles. The vaults must be accessible by armoured vehicles. 3.3.1.3 The recognized vaults shall have strong rooms of adequate usable size for storage and handling of gold. The strong rooms must be of adequate strength to ensure protection from possible threats, such as, fire, theft, burglary, etc. 3.3.1.4 The gold deposited for creation of EGRs shall be stored in separate racks providing clear-cut demarcation of EGR business from its other businesses. The storage area within the recognized vault shall be free from materials which may adversely affect the quantity or quality ....
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....erlying gold from the recognized vault. 3.3.5 The Vault Manager shall have systems for recovery and backup of data to prevent loss of electronic data. 3.3.6 The abovementioned norms are the minimum requirements which the Vault Managers are required to ensure for compliance by the recognized vaults. The Vault Manager may have additional requirements in place for running their operations related to EGR, without diluting the above minimum requirements. 3.4 Insurance 3.4.1 The Vault Manager shall take insurance, to fully cover the value of the gold stored in the recognized vaults, against all potential perils relevant to gold for which insurance cover is available. 3.4.2 The Vault Manager shall take insurance to cover the risk from theft, fire, burglary, fraud, negligence and force majeure events. They shall also take Fidelity Guarantee and Crime Insurance and Professional Indemnity Cover to cover all potential losses. 3.4.3 The Vault Manager shall undertake to buy insurance cover against terrorism, for recognized vaults located in areas which are notified under the Armed Forces Special Powers Act, 1958 (AFSPA). 3.4.4 The value o....
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....ng information regarding revision in charges from a Vault Manager, shall also intimate the revised charges of the said Vault Manager to all the existing clients. 3.6.2 Collection 3.6.2.1 The Vault Manager shall raise the invoice and collect the storage charges on a monthly basis from the Depositories. The Depositories shall, in turn, collect the storage charges from the beneficial owner at the end of the month or on sale of EGR or on withdrawal of gold by the beneficial owner, whichever is earlier. In case of inter- Depository transfer of EGRs due to sale of EGR, the storage charges shall be settled between the two Depositories on mutual understanding. The charges collected by the Depositories for each month shall be credited to the account of the concerned Vault Manager within seven working days of the succeeding month. 3.6.2.2 The Depositories shall deposit and maintain the storage charges received by it pertaining to the Vault Managers in a separate account. 3.6.2.3 In case of any request for withdrawal of gold from the vault is received from the Beneficial Owner (BO) in the depository system, the Depositories shall not process the request unt....
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....e hazards. 3.8.3.2 The Vault Manager shall ensure that addresses and telephone numbers of fire station, police station and designated officials of the Vault Manager are displayed at conspicuous places so that in case of emergency, the concerned authorities may be contacted without any delay. 3.8.3.3 To avoid any outbreak of fire in the premises, the Vault Manager shall ensure the following: 3.8.3.3.1 Smoking or lighting match-stick inside the vaults shall be strictly prohibited. 3.8.3.3.2 'NO SMOKING' boards shall be prominently displayed. 3.8.3.3.3 Warehouse security shall ensure that no person entering in its premises carry any match box, gas lighter, chemicals and inflammable items which can cause fire. 3.8.3.3.4 The lighting and other arrangements in the vault premises shall be satisfactory and their periodical check-up shall be made to ensure that no electric line is defective. 3.8.3.3.5 Adequate fire extinguishers shall be there at the premises and the employees shall be familiar with the use of such fire extinguishers. 3.8.3.3.6 The Vaults shall have fire alarms. 3.8.3.3.7 All the firefighting e....
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....nd provide services to the client at its own expense. 3.9.7 The Vault Manager shall submit a detailed report of the incident of loss/damage of the gold deposits with it against EGRs, to the Depositories. 3.10 Maintenance of records 3.10.1 The Vault Manager shall maintain the following records: 3.10.1.1 Documents for traceability of gold 3.10.1.2 Know your depositor (KYD) details 3.10.1.3 Certificate of indemnity from refiner/depositor and purity certificate. 3.10.1.4 Acknowledgment slip issued and received during the deposit and withdrawal respectively. 3.10.1.5 Purity, quantity and weight of deposited gold 3.10.1.6 Details of Creation and extinguishment of Electronic Gold Receipts 3.10.1.7 Details of the gold withdrawn 3.10.1.8 Details of movement of gold between recognized vaults or Vault Managers 3.10.1.9 All communications received or sent to the depositor/ authorized representative/beneficial owners 3.10.1.10 Details of complaints received and action taken thereof 3.10.1.11 Reports submitted to the Board. 3.10.1.12 Other documents related to transact....
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....ault shall be ceased, till the complaint is resolved. 3.12.4.2 Quality related complaints 3.12.4.2.1 The complaints pertaining to the quality/purity of gold (deposited by accredited refinery) shall be taken up by the investor with the accredited assayer, empanelled with the Clearing Corporation. 3.12.4.2.2 In such scenario where the gold is assayed, the Vault Manager shall ensure that the gold has not moved out of the vaulting system and may facilitate to the extent of transporting the gold to and fro the laboratory of the assayer accredited with the Clearing Corporation. 3.12.4.2.3 All the expenses related to assaying shall be incurred by the beneficial owner on whose complaint the assaying is being done. 3.12.4.2.4 If the report of the assayer certifies that the gold is not as per the specified quality, the stock exchange shall ensure that the concerned accredited refinery makes good for the loss to the beneficial owner. 3.12.4.3 Other complaints 3.12.4.3.1 All other complaints related to the operations of the Vault Manager shall be resolved by the Vault Manager within seven working days 3.12.4.3.2 The compla....
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....r no. SEBI/HO/MRD1/DTCS/CIR/P/2021/33 dated March 22, 2021 and subsequent amendment or supersession thereto through any circular or master circular issued from time to time so as to maintain data and transaction integrity and prevent data loss pertaining to the operation of the interface/EGR segment. Vault Managers: 3.15.4 The Depositories shall provide interface to the Vault Managers, registered with SEBI, by entering into an agreement with them defining their rights and obligations. The interface shall be accessed by the Vault Managers for creation and extinguishment of EGR, reconciliation of records and other related activities as defined by the Depositories. 3.15.5 The Vault Mangers shall ensure that each of the recognized vaults has identified designated persons to access the interface to carry out the activities related to EGR. 3.15.6 The information of the identified designated persons shall be made accessible to the Depositories as and when required. Depositor/Beneficial Owner of EGR: 3.15.7 The Depositories shall provide user access, in the interface, to the depositors/clients for placing a request for deposit of gold (for creation....
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.... 3.16.1.4.6 Packing list 3.16.1.4.7 Customs clearance documents 3.16.1.4.8 Letter of indemnity from the refinery/depositor specifying that they are responsible for the quality of the gold deposited by them. 3.16.1.5 During the deposit, the Vault Manager shall necessarily weigh the gold bars and verify/match the details of each of the gold bar, against the deposit request, with the packing list. 3.16.1.6 The Vault Manager shall accept deposits coming only through accredited refineries or nominated agencies as defined in the Vault Managers regulations. 3.16.1.7 On acceptance of the gold, the Vault Manager shall furnish a physical or electronic receipt to the depositor and/or its authorized representative. 3.16.1.8 Upon acceptance of the gold, the Vault Manager shall record the following details and create EGR from the interface: 3.16.1.8.1 Name of the Depository having account of Beneficial Owner; 3.16.1.8.2 Details of Depository Participant; 3.16.1.8.3 Name and address of the beneficial owner; 3.16.1.8.4 Valid mobile number and email id of the beneficial owner 3.16.1.8.5 PAN nu....
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....cribed by the stock exchanges, for example 999, 995 etc. 3.17.1.3 The Depositories shall assign appropriate ISIN to the EGRs created by the Vault Managers in the system and record the EGRs. 3.17.1.4 Whenever the EGRs are created and made available for trading by the investor, the Depositories shall share the information about the availability of such EGRs for trading, with the stock exchanges. 3.17.1.5 Depositories shall verify the documents submitted by the Beneficial Owner to the Vault Manager before crediting the EGR in the demat account of the concerned Beneficial Owner. 3.18 Withdrawal of Gold and Extinguishment of EGR 3.18.1 Procedure 3.18.1.1 The Depositories shall allow the investor to place withdrawal request in the interface by selecting the choice of vault manager, recognized vault, quantity, ISIN and any other detail as specified by it. 3.18.1.2 The Depositories shall approve the withdrawal request after satisfying the following: 3.18.1.2.1 The beneficial owner has the number of EGRs of the specified ISIN in his demat account representing the quantity of gold he desires to withdraw 3.18.1.2.2 The....
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....tock exchanges. 4.1.2 The trading of EGR shall take place on stock exchanges, in the 'trading unit', which shall be specified by the stock exchanges. The stock exchanges shall ensure that trading unit is not smaller than 10th part of the corresponding deposit unit. For example: On deposit of 100gm gold bar, 1 EGR may be created of 100 gm trading unit or 10 EGRs may be created of 10gm each trading unit. 4.1.3 The 'settlement unit' of EGR shall be same as 'trading unit', which shall be specified by the stock exchanges. 4.1.4 Beneficial owner of EGR intending to obtain physical gold against the EGR/s, shall follow the procedure as stated in Chapter 1 of this Master Circular. The 'withdrawal unit' of EGR shall be same as 'deposit unit', which shall be specified by the stock exchanges. 4.1.5 In addition to ISIN norms specified in Chapter 3 of this Master Circular the ISINs of EGRs shall also contain details of deposit unit and trading unit, for the purpose of easy identification by the investors. 4.1.6 The stock exchanges shall disseminate adequate information to investors, especially for EGRs with different deposit and trading unit. ....
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..... To begin with the haircut shall be a minimum of 10% Not to exceed 10% of the total liquid assets of the clearing member. (Note 'e') Gold ETF /Bullion (Note 'j') 20% Gold ETF/Bullions as collateral for any clearing member shall not exceed 30% of the total liquid assets of the clearing member (Note 'f') EGR 20% No limit Notes: a. The valuation of the liquid assets shall be done on a daily basis after applying applicable haircuts. b. The Stock Exchange shall lay down exposure limits either in rupee terms or as percentage of the total Liquid Assets that can be exposed to a single bank directly or indirectly. The total exposure towards any bank would include Bank Guarantees issued by the bank as well as debt or equity securities of the bank which have been deposited by members towards total liquid assets. Not more than 1% of the total liquid assets deposited with the Stock Exchange, shall be exposed to any single bank which has a net worth of less than INR 500 crores and is not rated P1 (or P1+) or equivalent, by a recogni....
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....e no netting across two different settlements. 5.3.4 There would be no netting off the positions and setoff against MTM profits across 2 rolling settlements i.e. T day and T-1 day. However, for computation of MTM profits/losses for the day, netting or setoff against MTM profits would be permitted. 5.3.5 The MTM losses so collected shall be released along with the pay-in, including early pay-in of EGR. 5.4 VaR Margin 5.4.1 Computation of VaR Margin The VaR Margin is a margin intended to cover the highest loss that can be encountered on 99.9% of the days (99.9% Value at Risk). The VaR Margin would be based on 6σ, subject to minimum initial margin of 9%. 5.4.2 Collection of VaR Margin 5.4.2.1 The VaR margin shall be collected on an upfront basis by adjusting against the total liquid assets of the member at the time of trade. 5.4.2.2 The VaR margin shall be collected on the gross open position of the member. The gross open position for this purpose would mean the gross of all net positions across all the clients of a member including his proprietary position. 5.4.2.3 For this purpose, there would be no net....
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....ay impose shall be based on objective criteria and shall not discriminate between members on the basis of subjective criteria. 5.7 Margin provisions for intra-day crystallised losses 5.7.1 The intra-day crystallised losses shall be monitored and blocked by Clearing Corporations from the free collateral on a real-time basis only for those transactions which are subject to upfront margining. For this purpose, crystallised losses can be offset against crystallised profits at a client level, if any. 5.7.2 If crystallised losses and applicable margins (as defined above) exceed 90% of the free collateral available with the Clearing Corporation, then the entity shall be put into risk reduction mode as given under para 5.17. 5.7.3 Crystallised losses shall be calculated based on weighted average prices of trades executed. 5.7.4 Adjustment of intraday crystallised losses shall not be done from exposure free deposit of the clearing member. 5.8 Provision of Early Pay-in 5.8.1 Necessary systems shall be put in place to enable early pay-in of funds/ EGR. In cases where early pay-in of funds/EGR is made by the members, the outstanding position t....
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....ch day of continued shortfall beyond the 3rd day of shortfall. 5.11.3 If short/non-collection of margins for a client takes place for more than 5 days in a month, then penalty of 5% of the shortfall amount shall be levied for each day, during the month, beyond the 5th day of shortfall. 5.11.4 All instances of non-reporting shall amount to 100% short collection and the penalty as applicable shall be charged on these instances in respect of short collection. 5.11.5 The penalty shall be collected by the Clearing Corporation within five days of the last working day of the trading month and credited to its SGF. 5.11.6 The margin statement which is forwarded on a daily basis by the broker to the clients shall include a column stating the margin charged by the Stock Exchange/Clearing Corporation. 5.11.7 When penalty is being collected by a broker for short collection/ non- collection other than upfront margins from a client, then the broker shall provide the relevant supporting documents to the client. 5.11.8 If TM/ CM collects minimum 10% upfront margin in lieu of VaR and ELM from the client, then penalty for short-collection/ non-col....
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.....14.2.1 In cases where the amount of shortage in a settlement for a clearing member is in excess of the deposit specified as per Table 2 of Clause 7 in Schedule VI of Securities and Exchange Board of India (Stock Brokers) Regulations,1992, the clearing facility of the member shall be withdrawn and the EGR pay-out due to the member shall be withheld. 5.14.2.2 In cases where the amount of shortage exceeds 20% of the deposit but less than the deposit on six occasions within a period of three months, then also the clearing facility of the member shall be withdrawn and the EGR pay-out due to the member shall be withheld. 5.14.2.3 Upon recovery of the complete shortages, the member shall be permitted to provide clearing facility subject to his providing a deposit equivalent to his cumulative funds shortage as the 'funds shortage collateral'. Such deposit shall be kept with the Clearing Corporation for a period of ten rolling settlements and shall be released thereafter. Such deposit shall not be available for adjustment against margin liabilities and also not earn any interest. The deposit may be by way of cash, fixed deposit receipts or bank guarantee. ....
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....level. The funds shall be settled on gross basis at member level. 5.19 Activity Schedule for T+1 Rolling Settlement The activity schedule is as under: Sr. No. Day Time Description of activity 1 T Trade Day By 2.00 AM Completion of process and download provisional obligation files to stock brokers/ custodians by the Clearing Corporation. 2 T+1 By 2.00 PM Funds and EGR pay-in By 4.30 PM Funds and EGR pay-out Custodian confirmations shall happen before beginning of T+1. 5.20 Settlement of Funds 5.20.1 Clearing Corporation shall empanel clearing banks based on various financial and operational criteria. Clearing members shall open single settlement account with any of the clearing banks. 5.20.2 The paying member shall have clear funds in settlement account on settlement day. The Clearing Bank shall debit the paying members' account. in accordance with electronic instructions received from Clearing Corporation. The Clearing Bank shall credit the receiving members' settlement account in accordance with the pay-out instructions received electronically from the Clearing Corporat....
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....tlement for T day trade 3 By T+1 Auction session 4 By T+2 Pay-in/pay-out and close-out of auction 5.23.2 In case of bank holidays, when multiple settlements (say S1 and S2) are conducted on the same day (say Tm), on the working day immediately following the day(s) of the closure, the auction session shall be as under: 5.23.2.1 The auction of first settlement (S1) shall be conducted on the same day (Tm) and settled by next day (Tm+1). 5.23.2.2 The auction for the second settlement (S2) shall be conducted on the next day (Tm+1) along with the shortages/auction of that day. The settlement of the same shall happen by the subsequent day (Tm+2). 5.24 Close-out Procedure 5.24.1 The Close-out Procedure shall be as below: "The close out Price shall be the highest price recorded in that EGR on the Stock Exchange from the date of trading and up to the date of auction/close out OR 3% above the latest available closing price at the exchange on the day on which auction offers are called for WHICHEVER IS HIGHER 5.25 Proceeds from Auction/ Close-out 5.25.1 The proceeds from Auction/ Close....