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CS Executive · Capital Market and Securities Laws · Securities Contracts (Regulation) Act, 1956

Bharat Bourse, a recognised stock exchange, wants its clearing house functions for settlement of contracts and delivery of and payment for securities to be performed by a separate entity, Bharat Clearing Ltd. Under the Securities Contracts (Regulation) Act, 1956, what is required for this transfer?

A recognised stock exchange can transfer its clearing house duties to a clearing corporation only with the prior approval of SEBI, and the clearing corporation must be a company incorporated under the Companies Act. The exchange's own decision or Registrar approval is not enough.

  1. APrior approval of SEBI, and the receiving entity must be a company incorporated under the Companies ActCorrect
  2. BApproval of the Registrar of Companies, and the entity may be any partnership firm
  3. CApproval of the stock exchange's governing body alone, with no SEBI involvement
  4. DApproval of the Central Government, and the entity must be a statutory corporation

Explanation

Section 8A allows a recognised stock exchange, with SEBI's prior approval, to transfer clearing house duties to a clearing corporation, which must be a company incorporated under the Companies Act. The option that dispenses with SEBI approval is wrong because SEBI approval is mandatory.

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