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CS Executive · Capital Market and Securities Laws · Secondary Market in India

An exchange's bye-laws provide that members must deposit margins on their trades and set out the consequences if a seller or buyer defaults. Which provision of the Securities Contracts (Regulation) Act, 1956 supports such bye-laws?

Section 9(2) of the Act lets exchange bye-laws prescribe margin requirements and the consequences of default or insolvency by a seller or buyer. These are listed matters for regulating contracts. Section 12A concerns SEBI's directions, not the content of exchange bye-laws.

  1. ASection 9(2), which lists margin requirements and consequences of default as matters bye-laws may coverCorrect
  2. BSection 12A, which only allows SEBI to levy penalties
  3. CSection 9(3), which restricts bye-laws to fines only
  4. DSection 9(4), which requires bye-laws to be approved by the exchange's members

Explanation

Section 9(2)(j) covers terms and incidents of contracts including margin requirements, and 9(2)(k) covers the consequences of default or insolvency of a seller or buyer. Section 12A deals with SEBI directions, not exchange bye-laws. Section 9(3) lists punishments such as fine, expulsion and suspension, and 9(4) concerns publication after SEBI approval.

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