CS Executive · Capital Market and Securities Laws · Secondary Market in India
A recognised stock exchange wants to make bye-laws setting up a clearing house for periodic settlement of contracts and for delivery of and payment for securities. Under the Securities Contracts (Regulation) Act, 1956, what is required before such bye-laws can be made?
A recognised stock exchange may make bye-laws, including those for a clearing house for settlement of contracts and delivery of and payment for securities, only with the previous approval of SEBI. The Act vests this approval power in SEBI, not the RBI or State Government.
- APrevious approval of the Securities and Exchange Board of IndiaCorrect
- BPrior approval of the Reserve Bank of India
- CResolution passed by the listed companies on the exchange
- DPermission of the State Government where the exchange is located
Explanation
Section 9(1) allows a recognised stock exchange to make bye-laws for regulation and control of contracts only subject to the previous approval of SEBI. Section 9(2)(b) expressly lists a clearing house for periodic settlement among the matters bye-laws may cover. RBI, listed companies and State Governments have no such approval role under this section.
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