Bullion Association teams up with BSE for first physical gold exchange

India Bullion and Jewellers Association (IBJA), a Mumbai-based association of gold traders and jewellers, has signed an agreement with the Bombay stock exchange (BSE) for setting up a bullion exchange for spot trading, the first of its kind in India.

It is proposed to create a special purpose vehicle for implementing the project, wherein IBJA and its constituents will hold 70 per cent and BSE the remaining 30 per cent.

BSE will provide the trading technology, platform and technical knowhow, while IBJA will put in place the necessary infrastructure, funds and trading expertise.

Both parties have approached the union ministry of finance for approval. The proposed exchange is expected to start trading in the first quarter of the next fiscal (2016-17).

''We are hopeful (of getting this) very soon,'' said Mohit Kamboj, president of IBJA. The idea of setting up a spot bullion exchange was floated last month by Union economic affairs secretary Shaktikanta Das.

The setting up of a physical exchange will help jewellers, retailers, refiners to trade in gold on a regulated platform.

A dedicated physical exchange will also lead to standard gold pricing, and bring transparency to a market involving large cash transactions.

The exchange will primarily trade in gold and, over the years, plans to launch trading in other precious metals like silver.

The plan is to offer three settlements a day for both buyers and sellers. ''It will work like a retail shop. You can buy gold of even small denominations on a real-time delivery basis. Other types of trading will be available for large quantities, for which delivery will be on T+1 and T+2 bases,'' said Ketan Shroff, director, IBJA.

The exchange is looking at banks to actively participation the exchange. However, banks at present are not allowed to trade in gold.

Gadgil said much will also depend on the government passing the proposed goods and services tax bill to reform the country's tax system.

The partners in the exchange will next week seek approval from the Indian capital markets regulator securities and exchange Board of india (Sebi).