Corporate and Economic Laws · SEBI Laws and Regulations

Listing, Contracts and Dealings in Securities under SCRA 1956

Updated 11 October 2026 · Fact-checked

The Securities Contracts (Regulation) Act, 1956 (SCRA) regulates stock exchanges and dealings in securities. Stock exchanges make bye-laws (with SEBI approval) for contracts and listing. Spot delivery contracts are excluded from sections 13, 14, 15 and 17. Derivative contracts are legal if traded on a recognised exchange and settled through its clearing house. Read each question, spot the section, apply its exact condition.

Understand Listing, Contracts and Dealings in Securities under SCRA

The SCRA is the law for the market place. The SEBI Act, 1992 sets up the regulator and its powers. The SCRA controls how stock exchanges are recognised, how securities are listed, and how contracts in securities are made and settled. Think of SEBI as the referee and the SCRA as the rules of the ground.

The stock exchange itself makes rules. Under section 9, a recognised stock exchange may, with the previous approval of SEBI, make bye-laws for the regulation and control of contracts. The list in section 9(2) is long. It covers market hours, the clearing house, blank transfers, budlas or carry-over facilities, settlement days, margins, terms of contracts, listing, suspension or withdrawal of securities, arbitration of disputes, fees, fines and penalties, brokerage scale, emergencies such as cornering, and dealings by members for their own account. Section 9(3) lets bye-laws say which breaches make a contract void under section 14(1), and lets them punish a member by fine, expulsion, suspension or a similar non-monetary penalty. Bye-laws take effect from the date of publication in the Gazette of India after SEBI approval. SEBI can dispense with previous publication if it records reasons in writing and finds it in the interest of trade or the public.

Not every contract is treated the same. Spot delivery contracts (section 18) are excluded from sections 13, 14, 15 and 17. But if the Central Government thinks it expedient in the interest of trade or the public interest, it can by notification apply section 17 (the delaying business provision) to spot delivery contracts in a State or area, generally or for specified securities, and can fix the manner and extent.

Derivatives are dealt with in section 18A. Notwithstanding any other law, a derivative contract is legal and valid if it is (a) traded on a recognised stock exchange, and (b) settled on the clearing house of the recognised stock exchange or in accordance with its rules and bye-laws, or (c) between such parties and on such terms as the Central Government specifies by notification. For commodity derivatives, section 30A says the Act does not apply to non-transferable specific delivery contracts, with a proviso against associations that allow performance without actual delivery. The Central Government can exempt transferable specific delivery contracts in an area where section 13 applies, or can bring non-transferable ones under the Act by notification.

Listing has two sides. SCRA section 9(2)(m) lets exchange bye-laws govern listing, inclusion for dealings, suspension and withdrawal. Under the SEBI Act, section 11A lets SEBI specify by regulations the matters on issue of capital and transfer of securities and their disclosure by companies, prohibit or condition a prospectus, offer document or advertisement soliciting money, and specify listing and transfer requirements, without prejudice to section 21 of the SCRA.

Key rules to remember

Bye-laws of exchange: Recognised stock exchange + previous approval of SEBI → bye-laws for regulation and control of contracts (section 9(1)); Effective from date of publication in Gazette of India after SEBI approval; SEBI may dispense with previous publication by written order giving reasons.
Punishment for bye-law breach: Fine | expulsion | suspension for a specified period | any like non-monetary penalty (section 9(3)(b)); These are bye-law penalties on members, not court penalties.
Spot delivery contracts: Sections 13, 14, 15 and 17 do not apply (section 18(1)); Central Government may apply section 17 by notification (section 18(2)); Condition: expedient in the interest of trade or public interest.
Valid derivative contract: Traded on recognised exchange AND settled via its clearing house/rules or bye-laws; or parties and terms notified by Central Government (section 18A); Operates notwithstanding any other law.
Commodity derivatives: Non-transferable specific delivery contracts are outside the Act (section 30A(1)), subject to proviso and Central Government notification power; Government can also exempt transferable specific delivery contracts in section 13 areas.
SEBI powers on offer documents: Section 11A: regulations on issue of capital and disclosures; orders to prohibit or condition prospectus, offer document or advertisement; listing requirements; Applies for the protection of investors, without prejudice to the Companies Act and SCRA section 21.

How to solve Listing, Contracts and Dealings in Securities under SCRA questions

Use this method for any question on listing, contracts and dealings under the SCRA and SEBI Act.

1Identify the issue: bye-laws, listing, spot delivery, derivatives, commodity contract, or SEBI's power over offer documents.
2Name the Act first. Exchange-level rules and contract validity point to the SCRA; investor protection regulations point to the SEBI Act.
3State the rule in plain words with its exact condition, for example approval of SEBI or trading on a recognised exchange.
4Check the exceptions and the Central Government's notification power, especially for sections 18 and 30A.
5Apply the rule to the facts and test each condition one by one.
6Conclude clearly: valid or void, applicable or not, permitted or not.
7Quote a section number only if you are sure of it.

Quickest way: Two-condition check for derivatives and spot delivery

When to use it: Short MCQs and case scenarios asking whether a contract is legal or whether a section applies.

Derivative: ask two questions. Is it traded on a recognised exchange? Is it settled through that exchange's clearing house or bye-laws? Both yes means valid. Otherwise check for a Central Government notification.
Spot delivery: default answer is that sections 13, 14, 15 and 17 do not apply. Look for a notification under section 18(2).
Bye-laws: no SEBI approval means no valid bye-law.
Match the regulator: SEBI Act for regulations and offer documents; SCRA for exchange and contract rules.

Common mistakes in Listing, Contracts and Dealings in Securities under SCRA

Saying exchanges can make bye-laws on their own.
Students remember the power but forget the condition.
Fix: Always write previous approval of SEBI, and effect from publication in the Gazette of India.
Treating spot delivery contracts as fully outside the SCRA.
Section 18(1) is remembered, subsection (2) is skipped.
Fix: Say only sections 13, 14, 15 and 17 are excluded, and the Central Government can apply section 17 by notification.
Calling every derivative contract valid.
Section 18A is read as a blanket validity rule.
Fix: Validity needs trading on a recognised exchange plus settlement by its clearing house or rules, or notified parties and terms.
Mixing SEBI Act and SCRA powers.
Both deal with securities markets and look alike.
Fix: The SEBI Act covers the regulator, its regulations and section 11A; the SCRA covers recognised exchanges, bye-laws and contracts.
Confusing non-transferable and transferable specific delivery contracts in section 30A.
The two terms sound the same.
Fix: The Act does not apply to non-transferable ones under 30A(1); the Central Government can exempt transferable ones in section 13 areas under 30A(2).

Worked examples

Example 1

A recognised stock exchange frames a bye-law fixing a scale of brokerage and prescribing margin requirements. It brings the bye-law into force on the day its governing body approves it, without SEBI approval or Gazette publication. Is this valid?

Show the solution

Section 9(2) allows bye-laws on a scale of brokerage and on margin requirements as part of contract terms.
Section 9(1) requires previous approval of SEBI before bye-laws are made.
Section 9(4) says approved bye-laws are published in the Gazette of India and have effect from that publication date.
SEBI may dispense only with previous publication, by a written order stating reasons. It cannot dispense with its own approval.
Here neither SEBI approval nor Gazette publication exists.

Answer: The bye-law is not validly in force. The subject matter is permitted, but SEBI approval and Gazette publication are missing.

Example 2

Anand Traders buys index futures on a recognised stock exchange and the trade is settled through that exchange's clearing house. A party later argues the contract is a wagering contract under another law. Is the contract legal?

Show the solution

Section 18A applies notwithstanding any other law.
Test condition (a): traded on a recognised stock exchange. Yes.
Test condition (b): settled on the clearing house of the exchange or under its rules and bye-laws. Yes.
Both conditions are met, so the contract is legal and valid despite the other law.

Answer: The derivative contract is legal and valid under section 18A.

Exam tips

Expect MCQs on section 18A conditions and section 18(1) exclusions. Learn the exact lists.
In case scenarios, tick off each condition in the facts before concluding.
For descriptive answers, give a short list of section 9(2) topics: clearing house, margins, listing, arbitration, fines.
Write the Act name with every power, so the examiner sees you separate SEBI Act from SCRA.
Do not quote penalty amounts or section numbers unless sure of them; plain-words rules earn marks.

Practice questions from SEBI Laws and Regulations

Listing, Contracts and Dealings in Securities under SCRA in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveContracts in Securities and Listing

Listing, Contracts and Dealings in Securities under SCRA: frequently asked questions

What is the difference between the SEBI Act and the SCRA?

The SEBI Act, 1992 creates SEBI and gives it powers, such as regulations on issue of capital and control over offer documents under section 11A. The SCRA, 1956 regulates recognised stock exchanges, their bye-laws and contracts in securities. They work together.

Are spot delivery contracts covered by the SCRA?

Sections 13, 14, 15 and 17 do not apply to them. The Central Government can by notification apply section 17 to spot delivery contracts in an area if it is expedient in the interest of trade or the public interest.

When is a derivative contract valid under the SCRA?

Under section 18A it is legal and valid if traded on a recognised stock exchange and settled on its clearing house or under its rules and bye-laws. It is also valid between parties and on terms the Central Government notifies.

Who makes listing rules?

Recognised exchanges can make bye-laws on listing, suspension and withdrawal of securities with SEBI approval under section 9. SEBI can also specify listing and transfer requirements under section 11A(2) of the SEBI Act.