METAL MAGIC

● Real-time trading in gold and silver by end of this month. Only costs involved are safekeeping and insurance charges ● Investors will have to register with a member broker of the exchange and keep a margin money of 5% of the traded value ● A buyer can either hold the metals in a demat form or get a warehouse receipt from Group 4 Securitas or take physical delivery

Calcutta, Nov. 9: Retail investors in Bengal will soon get a more cost-effective platform to seamlessly trade in gold and silver.

National Spot Exchange Ltd (NSEL), jointly promoted by Financial Technologies India Ltd and National Agricultural Cooperative Marketing Federation of India Ltd, is set to roll out its electronic platform for spot trading in the precious metals in Calcutta by the end of this month.

In the absence of a spot exchange, people who wanted to invest in gold and silver as an alternative to battered equities had three options.

They would have to buy either jewellery or bars and coins from banks or in the paper form of exchange traded funds (ETFs) launched by mutual funds a year ago.

According to Anjani Shah, managing director and CEO, NSEL, “When you go to sell your jewellery, the jeweller will deduct value-added tax, making charges and other such fees from the sale value. Banks do not buy back the gold bars and coins once sold. Even ETFs also come with an incidental cost of 2.5 per cent of the asset under management of the schemes that the fund house deduct every year for managing the scheme.”

Shah said the cost associated with trading on the electronic platform, such as safekeeping expenses and insurance charge, would amount to only 0.02 per cent of the value of a transaction.

“Besides, customers get real-time market value and not the discounted value of their holding,” Shah said.

Gold bars (with purity of more than 99.5 per cent) can be traded on the spot exchange in lots of 100 gm and 1kg to start with, and silver in lots of 30 kg. “Later on, we’ll introduce lot sizes in 10 gm and 50 gm for gold and 1 kg for silver to encourage the participation of retail investors,” Shah said.

The rule book

To buy or sell precious metals through the exchange, investors will have to register with a member broker of the exchange and keep a margin money of 5 per cent of the traded value.

Investors can also sell on the exchange gold and silver coins and bars purchased from banks.

They need to produce original purchase bills and purity certificates.

However, the metal can be sold on the exchange only after NSEL agents test its purity to their satisfaction.

For a 100gm bar, the fee for testing the purity of the metal is Rs 100.

On October 15, NSEL had rolled out its first spot exchange for bullion trading in Ahmedabad.

“Next we’ll roll out exchanges in Chennai, Delhi and Mumbai,” Shah said.

It has a tie-up with multinational security firm Group 4 Securitas which has a safe deposit vault at Bowbazar in central Calcutta.

“A buyer can either hold the precious metals in a demat form or get a warehouse receipt from Group 4 Securitas or take physical delivery. The warehouse receipts can also be traded on the exchange,” Shah said.