The beleaguered commodity bourse, which is under severe pressure to redeem the e-series units, has proposed a faster exit route to its unit holders by way of financial settlement or encashment of e-series gold and silver units rather than giving physical delivery of equivalent precious metals.
Though the exchange has the required physical inventory, the process for physical delivery is taking substantial time due to heavy redemption pressure.
“In order to offer a fast exit route to unit holders, the exchange has made an arrangement of providing exit option to all e-series holders of gold and silver units by way of financial settlement (encashment of E-Series units), after considering the feedback received from all market participants and after due discussions and deliberations with the prospective buyers,” read the exchange circular.
The exchange has said that unit holders can redeem their units by the above method on any day starting from October 3 to October 9 (both days inclusive but excluding Saturday and Sunday) or extinction of units, whichever is earlier.
The faster exit route comes as a relief for about 7 lakh small investors in e-series contracts as the exchange had stopped trading of e-series contracts since August 6 after it could not payout around Rs 5,500 crore to its investors for their trade settlements – in other commodity contracts – on account of default by 24 of its members.
As per the Sharp & Tannan Associates audit report, the exchange had physcial gold, silver and platinum stocks to the tune of 910.65 kg, 46,167.71 kg and 19 kg, respectively, lying in the vaults for delivery to small investors in e-series contracts.
The exchange has also said all existing surrender request forms for physical delivery shall be cancelled and units will be returned back to designated beneficiary owner (BO) account of respective beneficiaries, so as to provide an opportunity to investors to participate in the transparent process of financial settlement.
The redemption price for the financial settlement shall be arrived at each day based on the standard acceptable market practice under which the landing cost of gold and silver in India shall be arrived based on the London AM spot fixing price. Exchange shall announce the price so arrived by way of disseminating the same on the exchange website on each day by 3.30 pm for gold and 4.45 pm for silver,” stated the circular.