Financial products with bullion as underlying and electronic gold receipt with underlying physical gold to be treated as securities under Securities Contracts (Regulation) Act 1956

## Report on Notification Regarding Securities Contracts Regulation Act, 1956 **1. Executive Summary:** This report analyzes a notification issued by the Ministry of Finance, Department of Economic Affairs, on December 24, 2021. The notification declares certain financial products – bullion spot delivery contracts and bullion depository receipts with underlying bullion – as securities under the Securities Contracts Regulation Act, 1956 (SCR Act). This declaration applies specifically to the issuance and trading of these securities within an International Financial Services Centre (IFSC) governed by the International Financial Services Centres Authority Act, 2019. The key finding is that this notification expands the scope of securities recognized under the SCR Act for the purpose of IFSC operations, potentially fostering greater trading activity and product innovation within these centers. **2. Introduction:** The purpose of this report is to provide an informative analysis of the notification S.O. 5392(E) issued by the Ministry of Finance on December 24, 2021, pertaining to the Securities Contracts Regulation Act, 1956. This analysis is based solely on the content of the provided notification text. **3. Policy Overview:** * **Core Objective(s):** The primary objective, as inferred from the text, is to facilitate the issuance and trading of specific bullion-related financial products (bullion spot delivery contracts and bullion depository receipts) within International Financial Services Centres (IFSCs) by classifying them as "securities" under the Securities Contracts Regulation Act, 1956. **4. Background and Rationale:** * **New Policy:** The notification addresses the need to clarify the regulatory status of bullion spot delivery contracts and bullion depository receipts with underlying bullion within the specific context of IFSCs. Without this clarification, the trading and issuance of these instruments within IFSCs may have faced regulatory uncertainty, potentially hindering the development of these markets. **5. Key Provisions / Changes:** * **New Policy:** The notification declares two specific financial products as "securities" under the Securities Contracts Regulation Act, 1956, *specifically* for the purpose of issuance and trading within International Financial Services Centres governed by the International Financial Services Centres Authority Act, 2019. The two products are: * Bullion spot delivery contract; and * Bullion depository receipt with underlying bullion. * This means that these financial products will now be subject to the regulations and provisions of the SCR Act when issued and traded within the specified IFSC framework. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders include: * **Entities operating within International Financial Services Centres (IFSCs):** This includes exchanges, brokers, depositories, and other financial institutions involved in the issuance and trading of securities. * **Investors:** Those interested in trading bullion spot delivery contracts and bullion depository receipts within IFSCs. * **International Financial Services Centres Authority:** As the governing body for IFSCs, this notification directly impacts its regulatory oversight. **7. Implementation Aspects (Inferred):** * **Responsible agency/bodies:** The Ministry of Finance, Department of Economic Affairs, issued the notification. The International Financial Services Centres Authority (IFSCA) will be responsible for overseeing the implementation and enforcement of the regulations related to these newly classified securities within their jurisdiction. * **Timelines or procedures:** The text does not specify any timelines or procedures beyond the date of the notification (December 24, 2021). Implementation details will likely be specified by the IFSCA. **8. Expected Outcomes / Impact of Changes:** * **New Policy:** The expected outcomes and impact of this notification are: * **Increased Trading Activity:** By clarifying the regulatory status of these products, the notification aims to stimulate trading activity in bullion spot delivery contracts and bullion depository receipts within IFSCs. * **Product Innovation:** The clear regulatory framework could encourage the development of new and innovative financial products related to bullion within the IFSC ecosystem. * **Enhanced Investor Confidence:** Clear regulations can enhance investor confidence in the integrity and stability of the markets within IFSCs. * **Attracting Investment:** A more robust and clearly regulated market for bullion-related products within IFSCs may attract greater domestic and international investment. **9. Conclusion:** The notification declaring bullion spot delivery contracts and bullion depository receipts as securities under the Securities Contracts Regulation Act, 1956, for the purpose of issuance and trading within International Financial Services Centres is a significant step. It aims to promote a more active and regulated market for these financial products within IFSCs, potentially boosting investment and innovation in the sector. The notification's success will depend on the effective implementation and oversight by the IFSCA.

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