The International Financial Services Centres Authority, (IFSCA) on February 04, 2025, issued a notification regarding the Liquidity Enhancement Scheme for Bullion Exchange.
To enhance liquidity in illiquid commodity derivatives contracts, the Bullion Exchange in IFSC is permitted to introduce Liquidity Enhancement Schemes (LES). These schemes require prior approval from the Governing Board and must adhere to principles of transparency, non-discrimination, and market integrity. Incentives under LES may include fee discounts, cash payments, or issuance of shares, provided they do not exceed 25% of net profits, free reserves, or net worth as per audited financial statements. The Governing Board must review the effectiveness of LES quarterly, with mandatory half-yearly reporting to IFSCA.
The Bullion Exchange will determine the securities eligible for LES to enhance liquidity and disclose the list to the market. Incentives must be transparent and measurable, ensuring market integrity by preventing manipulative trades and prohibiting self-trading for incentives. Market makers/liquidity enhancers must follow obligations prescribed by the Bullion Exchange, with a conflict-of-interest disclosure framework.
The Bullion Exchange must implement necessary systems, amend rules/bylaws, and disseminate LES provisions to its members and the public. Compliance with the IFSCA (Bullion Market) Regulations, 2025 is mandatory, and the International Financial Services Centres Authority (IFSCA) will regulate and monitor the implementation of LES under its statutory powers.
[Notification No. IFSCA-DMCDPRMS/2/2023/DMC]
