**Executive Summary**
This document summarizes public comments received by the IFSCA on the draft IFSCA (Bullion Market) Regulations, 202x, following the issuance of a consultation paper on August 31, 2024. The comments address specific regulations and suggest modifications. The comments were considered by the authority at a meeting on December 19, 2024, and necessary modifications have been carried out in the IFSCA (Bullion Market) Regulations, 2025.
**Key Points / Main Content**
* **Regulation 2(1)(f) - Definition of "Bullion":**
* *Proposed Change*: Inclusion of the word "grains" after "bars" to explicitly include silver grains.
* *Rationale*: Aligns with DGFT's permission for importing silver grains through IIBX.
* **Regulation 5(1) - Demutualization:**
* *Proposed Change*: Qualified Jewelers and Qualified Suppliers who are Non-Trading and/or Non-Clearing Members on IIBX should not be restricted from subscribing to the equity of the exchange, capped at 5% of paid-up capital.
* *Rationale*: Aligns with existing practices for equity ownership in exchanges like BSE or MCX.
* **Regulation 5(2) - Recognition as a Bullion Exchange:**
* *Proposed Change*: Re-evaluation of the requirement for an "adequate Consumer Education and Protection Fund" as a primary condition for recognition.
* *Rationale*: The existing regulations include this requirement elsewhere. Also, seeks clarity if existing bullion exchanges in IFSC need to maintain this fund.
* **Regulation 10 - Withdrawal of Recognition:**
* *Proposed Change*: Clarification on whether the Authority or the Central Government has the power to withdraw recognition.
* *Rationale*: Seeks clarity on the withdrawal of recognition, under the Securities Contracts (Regulation) Act, 1956.
* **Regulation 18 - Orderly Winding Down:**
* *Proposed Change*: Extension of the framework for orderly winding down to Bullion Exchanges in addition to Bullion Clearing Corporations.
* *Rationale*: Bullion Exchanges are critical to the ecosystem, and such a framework could be helpful in involuntary scenarios.
* **Regulation 30(3) - Appointment of Managing Director:**
* *Proposed Change*: Increase the maximum age limit for appointment to seventy-five years to match the public interest directors.
* *Rationale*: To match with the age limit for public interest directors under the proposed Regulation 29(3).
* **Regulation 38(1) - Settlement Guarantee Fund:**
* *Proposed Change*: Settlement Guarantee Fund may kindly be defined
* *Rationale*: Suggests defining the Settlement Guarantee Fund and seeking IT Act exemption like SGF under SEBI regulations.
* **Regulation 46(1) and 47:**
* *Proposed Change*: No change needed.
* *Rationale*: Providing flexibility and not mandating depository and participant structure will facilitate the existing model of bullion depository to be compliant with regulations.
* **Regulation 49:**
* *Proposed Change*: This needs a review.
* *Rationale*: Bullion depository receipts created by depository in lieu of physical bullion stored with empanelled vaults currently has the unique congruence of bullion bar/bag number to bullion depository receipt. And hence essentially bullion depository receipts are not fungible.
* **Regulation 55(5):**
* *Proposed Change*: Registration is one time and valid till cancellation.
* *Rationale*: Vault registration has no validity.
* **Regulation 58(2):**
* *Proposed Change*: To exclude date of validity of vault
* *Rationale*: Vault manager to maintain an electronic record of delivery of BDR report sent to BO
* **Regulation 59(1):**
* *Proposed Change*: No change needed.
* *Rationale*: Providing flexibility and not mandating depository and participant structure will facilitate the existing model of bullion depository to be compliant with regulations.
* **Regulation 59(3):**
* *Proposed Change*: The vault manager shall employ the services of an assayer with the prior approval of the Authority in case of dispute
* *Rationale*: Employing assayer services at the time of deposit of bullion results in additional costs and turnaround time for bdr creation for the vault manager. Therefore, only in case of disputes assayer services to be employed.
* **Regulation 61(1):**
* *Proposed Change*: No change needed.
* *Rationale*: Providing flexibility and not mandating depository and participant structure will facilitate the existing model of bullion depository to be compliant with regulations.
* **Regulation 63(2):**
* *Proposed Change*: The proposed regulation has included any pending recovery proceeding by a financial regulatory authority as a disqualification for 'fit and proper' criteria.
* *Rationale*: It should only include the recovery proceedings which have been finally disposed off.
* **Regulation 63(2):**
* *Proposed Change*: This clause refers to "Fit & Proper" criteria for Directors, KMPs and Material Shareholders for Bullion Exchange/Clearing/Depository/Vault.
* *Rationale*: The applicability of this clause to Members and QJs may be reconsidered
* **Regulation 73(1):**
* *Proposed Change*: Maintenance of books of accounts
* *Rationale*: Mandating the books of accounts in electronic retrieval form to be maintained for twenty years is a big hurdle.
* **Regulation 73(1):**
* *Proposed Change*: This may be reconsidered
* *Rationale*: This may involve huge cost - IT & Maintenance as well as maintenance issues
* **Regulation 80(1):**
* *Proposed Change*: Requirement of 'disclosure of Dealing in securities'
* *Rationale*: This may kindly be clarified to avoid any non-compliance.
**Impact Analysis**
**Stakeholder: Bullion Exchanges**
* *Impact*: The regulations directly govern their operations, recognition, and internal structure.
* *Action Required*: Ensure compliance with the revised regulations, including any modifications to internal frameworks for orderly winding down, maintenance of funds, and managing director appointments.
**Stakeholder: Bullion Clearing Corporations**
* *Impact*: The regulations influence their operational framework, particularly concerning orderly winding down and the settlement guarantee fund.
* *Action Required*: Adapt internal policies to comply with the framework for orderly winding down and address any newly defined requirements for the settlement guarantee fund.
**Stakeholder: Bullion Depositories**
* *Impact*: Impacted by regulations governing agreements with participants and handling of bullion depository receipts.
* *Action Required*: Re-evaluate existing agreements and processes to align with the clarified regulations.
**Stakeholder: Vault Managers**
* *Impact*: The regulations impact their registration process and operational requirements.
* *Action Required*: Adapt procedures for reporting and assaying of bullion deposits to comply with the regulations.
**Stakeholder: Members & Qualified Jewellers/Suppliers**
* *Impact*: The fit and proper criteria would be impacting their business conduct.
* *Action Required*: Review conduct to be in alignment with compliance.
Key Entities Referenced
IFSCA (Bullion Market) Regulations: The central policy document being commented on.
IFSCA: The issuing authority of the regulations.
Securities Contracts (Regulation) Act, 1956: Act governing the withdrawal of recognition.
Bullion exchange: Entities seeking recognition under these regulations.
Bullion clearing corporation: Entities which the regulations impact.
Public Comments on draft IFSCA (Bullion Market) Regulations, 202x
The Consultation Paper seeking comments/suggestions from the public on the draft IFSCA (Bullion Market) Regulations, 202x was
issued by IFSCA on August 31, 2024. The following comments/suggestions were received:
Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
“bullion” shall mean precious metals, including
gold, silver or any other precious metal in the
form of bars or unallocated gold, silver, or such
To include word “grains” after DGFT has permitted Silver Grains to be
1 2 (1) (f) other precious metals, as the Authority may
bars to enable silver grains imported through IIBX.
consider relevant in this regard, relating to good
delivery, quality, quantity, and any other aspect
in relation to bullion trading from time to time;
The applicant is demutualized The Qualified Jewellers and Qualified
Suppliers who are Non-Trading
Explanation: - For the purposes of the sub- and/or Non-Clearing Members on
There in no restriction on a client from buying the
clause (b) of this regulation, the term IIBX may not be restricted from
2 5 (1) equity of a listed Stock or Commodity Exchange
“demutualised” means ownership and subscribing to the equity of the
like BSE or MCX.
management of the applicant is segregated Exchange. This can however be
from the trading rights or clearing rights, as the subjected to a maximum capping of
case may be. 5% of the paid up capital.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
The Regulations provides for the conditions for an
applicant to seek recognition as bullion exchange.
The proposed regulations have done away the
requirement for having adequate Consumer
An applicant seeking recognition as a
Education and Protection Fund, as a primary
bullion exchange shall, in addition to
An applicant seeking recognition as a bullion condition for seeking recognition, although
the conditions as specified in sub-
exchange shall, in addition to the conditions as provided separately under Regulation 37.
regulation (1), comply with the
specified in sub-regulation (1), comply with the The requirement for Consumer Education and
following conditions, namely:-
3 5 (2) following conditions, namely:- Protection Fund was provided in the IFSCA (Bullion)
…………
………… Regulations, 2020 (“2020 Regulations”) as well as
(k) adequate Consumer Education
(k) any other conditions as may be specified by provided by other regulators as well The purpose
and Protection Fund;
the Authority. of such fund was always to have a corpus in place
(l) any other conditions as may be
to deal with any defaults by the Bullion Trading
specified by the Authority.
Member. Further, please clarify if the bullion
exchange which has already set up in IFSC will have
the option to not maintain such fund in case the
suggested regulation is notified.
Withdrawal of Recognition: The
Withdrawal of Recognition: The recognition recognition granted to a bullion Section 5 of the Securities Contracts (Regulation)
granted to a bullion exchange or a bullion exchange or a bullion clearing Act, 1956 provides for the withdrawal of
clearing corporation may be withdrawn in the corporation may be withdrawn by the recognition by the Central Government. We
4 10
manner provided under Section 5 of the Authority after following the process recommend a clarity is provided in the regulation
Securities Contracts (Regulation) Act, 1956 (42 provided under Section 5 of the whether the withdrawal of recognition can be done
of 1956). Securities Contracts (Regulation) Act, by Central Government or the Authority.
1956 (42 of 1956).Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
Orderly winding down: (1) Every bullion clearing
corporation shall devise and maintain a
framework for orderly winding down of its
critical operations and services covering both
voluntary and involuntary scenarios.
(2) Every bullion clearing corporation shall Bullion Exchanges forms very critical part of the
ensure the framework provides for:- The mandate for framework for entire bullion ecosystem. There may be some
(a) the timely and orderly settlement or orderly winding down is to be involuntary scenarios where a bullion exchange
5 18
cessation or transfer of position(s), and/or; extended to Bullion Exchanges as might need to wind down its certain operations. In
(b) the transfer of the collateral(s) or deposit(s) well. such case, a handy framework for orderly winding
or margin(s) or any other asset(s) of the down can be very helpful.
members to another recognised bullion clearing
corporation that would take over the operations
of the bullion clearing corporation, and/or;
(c) such other related matter.
Appointment of Managing Director:
Appointment of Managing Director: ……. ……. Provided further that a person The public interest directors under the proposed
Provided further that a person may be may be appointed as the Managing Regulation 29(3) are appointed subject to a
appointed as the Managing Director by the Director by the recognized bullion maximum age limit of seventy-five years.
6 30 (3) recognized bullion exchange or recognized exchange or recognized bullion Therefore, we suggest that the appointment of the
bullion clearing corporation for a maximum clearing corporation for a maximum Managing Director be allowed to until the age of
period of ten years, subject to a maximum age period of ten years, subject to a seventy five years.
limit of sixty five years. maximum age limit of sixty five
seventy five years.
Settlement Guarantee Fund may be defined
and also to be followed up with the IT
Settlement Guarantee Fund may
7 38 (1) Settlement Guarantee Fund department for exemption of such fund under
kindly be defined
the IT Act as is given for SGF created under the
SEBI regulations.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
As the ecosystem was in its nascent stage and
envisaged bullion clientele was not very large,
A bullion depository shall enter into an A bullion depository may enter into bullion depository was allowed to perform the role
8 46 (1) agreement with one or more participants as its an agreement with one or more of participant as well. Providing flexibility and not
agent. participants as its agent. mandating depository and participant structure will
facilitate the existing model of bullion depository to
be compliant with regulations.
As the eco system was in its nascent stage and
Any person, through a participant, envisaged bullion clientele was not very large,
Any person, through a participant, may enter
may enter into an agreement, in such bullion depository was allowed to perform the role
into an agreement, in such form as may be
9 47 form as may be specified by the bye- of participant as well. Providing flexibility and not
specified by the bye- laws, with any bullion
laws, with any bullion depository for mandating depository and participant structure will
depository for availing its services.
availing its services. facilitate the existing model of bullion depository to
be compliant with regulations.
Bullion depository receipts created by depository in
Bullion depository receipts to be in fungible This needs a review as current lieu of physical bullion stored with empanelled
form. All bullion depository receipts issued by a process has bar/bag number vaults currently has the unique congruence of
10 49
bullion depository shall be in dematerialised congruence with each bullion bullion bar/bag number to bullion depository
form depository receipt number) receipt. And hence essentially bullion depository
receipts are not fungible.
Registration of Vault Managers - The Registration is one time and valid till
registration granted shall be subject to annual cancellation due to anything adverse
11 55 (5)
renewal as per the procedure specified by the found against the vault under
Authority. operation or vault manager.
Vault registration has no validity.
(b) vault registration number and date up to (b) To exclude date of validity of vault.
which it is valid; Vault managers feedback providing physical BDR
12 58 (2) Vault manager to maintain an report with date and signature of vault manager
(i) date and signature of the vault manager or electronic record of delivery of BDR involves physical paperwork and handling leads to
his authorised agent; report sent to BO ineffective process instead should be allowed to
intimate in electronic form.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
As the eco system was in its nascent stage and
Depositing bullion into vaults envisaged bullion clientele was not very large,
bullion depository was allowed to perform the role
13 59 (1) (1) A depositor shall place a request for the of participant as well. Providing flexibility and not
deposit of the bullion, with a vault empaneled mandating depository and participant structure will
by a bullion depository. facilitate the existing model of bullion depository to
be compliant with regulations.
The vault manager shall employ the Employing assayer services at the time of deposit
(3) At the time of deposit of the bullion, the
services of an assayer with the prior of bullion results in additional costs and
vault manager shall employ the services of an
approval of the Authority in case of turnaround time for bdr creation for the vault
14 59 (3) assayer, with the prior approval of the
dispute for the purposes of testing manager. Currently no such system is followed.
Authority, for the purposes of testing the good
the good delivery standard of the Therefore, only in case of disputes assayer services
delivery standard of the bullion.
bullion. to be employed.
This would mean that vault manager
takes the responsibility on the weight
At the time of deposit of the bullion, the vault and purity of gold, whereas global
manager shall be required to employ the standard is vault manager accepts it
15 59 (3) services of an assayer , if the Authority so on as reported basis. To mitigate such
desires, for the purposes of testing the good risks only refiner to vault and those
delivery standard of the bullion. vaults to another recognised vault
transfers allowed. Thus this section is
to be reconsidered.
As the eco system was in its nascent stage and
Withdrawal of Bullion
envisaged bullion clientele was not very large,
On the receipt of a request for the withdrawal
bullion depository was allowed to perform the role
of bullion from a beneficial owner through a
16 61 (1) of participant as well. Providing flexibility and not
participant, the bullion depository shall grant an
mandating depository and participant structure will
approval and intimate the same to the
facilitate the existing model of bullion depository to
concerned vault manager.
be compliant with regulations.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
Requirement of ‘fit and proper’: For
Requirement of ‘fit and proper’: For the the purposes of sub-regulation (1), a
purposes of sub-regulation (1), a person shall be person shall be deemed to be a fit
deemed to be a fit and proper person if: and proper person if:
The proposed regulation has included any pending
……. …….
recovery proceeding by a financial regulatory
(b) such person has not incurred any of the (b) such person has not incurred any
17 63 (2) authority as a disqualification for ‘fit and proper’
following disqualifications – of the following disqualifications –
criteria. It should only include the recovery
….. …..
proceedings which have been finally disposed off.
(vi) a recovery proceeding has been initiated (vi) a recovery proceeding has been
against the person by a financial regulatory initiated against the person by a
authority that is pending. financial regulatory authority that is
disposed finally.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
Reg. 63
As per SEBI Stock Brokers Reg 2008_amended upto
(1) …..
June 2024:
This clause refers to “Fit & Proper”
(2) For the purposes of sub-regulation (1), a criteria for Directors, KMPs and
Reg 5(e): (e) (Applicant Broker) is a fit and proper
person shall be deemed to be a fit and proper Material Shareholders for Bullion
person based on the criteria specified in Schedule II
person if: Exchange/Clearing/Depository/Vault.
of the Securities and Exchange Board of India
While this full chapter XIV also applies
(Intermediaries) Regulations, 2008;
(b) such person has not incurred any of the verbatim to Members & QJs seeking
following disqualifications – to get onboarded at IIBX. It is
As per SEBI (Intermediaries) Regulations, 2008:
recommended to re-look at Fit &
Sch II. Cl (3)(b) defines the criteria for determining
(iv) …….. and a period of three years from the Proper requirements for Members &
‘fit and proper’ status and the additional period of
date of the expiry of the period specified in the QJs.
18 63 (2) ‘three years’ as defined the IFSCA regulations is not
order has not elapsed;
there. While the criteria talks about pendency of
The applicability of this clause to
the matter and ‘order’ passed by authorities being
(v) ….. and a period of three years from the date Members and QJs may be
in force, the criteria of cooling period of three
of the order has not elapsed; reconsidered.
years is not there.
Further, as per Reg. 65: Further, reg. 65, may be made
IFSCA regulations stipulate additional 3 years.
If any question arises on the decision of a applicable to the intermediaries, in
bullion exchange, bullion clearing addition to reg. 63, so that the
This clause shall act as a deterrent for their
corporation, bullion depository or vault decision of the authority shall be final,
participation on IIBX while they can continue to
manager as to whether a person is a if any question arises on the decision.
import/supply Gold through all other channels as
fit and proper person, the Authority’s decision
TRQ holders or otherwise.
on such question shall be final.
Maintenance of books of accounts,
Maintenance of books of accounts, records and records and other documents: Every When the Authority is looking for ease of doing
other documents: Every recognised bullion recognised bullion clearing business in GIFT-IFSC, mandating the books of
clearing corporation shall maintain and preserve corporation shall maintain and accounts in electronic retrieval form to be
19 73 (1)
the following books of account and documents preserve the following books of maintained for twenty years is a big hurdle. The
in electronic retrieval form for a minimum account and documents in electronic 2020 Regulations provided for maintaining books
period of twenty years. retrieval form for a minimum period of accounts for 5 years.
of ten twenty years.Regulation no. as
per Annexure-I of
S No. Text of Regulation/ Sub-regulation Comments/Suggestions Rationale
the Consultation
Paper
This may be reconsidered and
Every recognised bullion exchange shall
maintain and preserve the books of account and directions may be for maintaining
documents referred to in rule 14 of the rules, the records for 8 years, of if there
This may involve huge cost – IT & Maintenance
20 73 (1) and such others records as may be specified by is a pending prosecution or the
as well as maintenance issues
the Authority from time to time, in electronic matter is in a court of law/sub-
retrieval form for a minimum period of twenty judice, till such time the matter is
years. disposed off.
Requirement of ‘disclosure of Dealing
in securities’ was a part of this
circular. Does this mean that This may kindly be clarified to avoid any non-
21 80 (1) Circular on Code of Conduct is rescinded.
Directors/KMPs etc of Bullion compliance.
exchange or CC are not required to
submit such disclosures any more.
IFSCA Comments:
The above comments/suggestions received were considered and placed before the Authority in its meeting held on December 19, 2024.
Necessary modifications have been carried out in the IFSCA (Bullion Market) Regulations, 2025.