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

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

A recognised stock exchange can transfer clearing house functions only with SEBI's prior approval, and the recipient must be a clearing corporation incorporated as a company under the Companies Act. An internal resolution of the exchange alone is insufficient.

  1. APrior approval of SEBI, and the transferee must be a clearing corporation that is a company incorporated under the Companies ActCorrect
  2. BApproval of the Registrar of Companies, with the transferee being a registered society
  3. COnly a resolution of the exchange's governing body, with no external approval
  4. DApproval of the State Government where the exchange's principal office is situated

Explanation

Section 8A allows a recognised stock exchange, with the prior approval of SEBI, to transfer clearing house duties and functions to a clearing corporation, which must be a company incorporated under the Companies Act. A governing body resolution alone is not enough because SEBI approval is mandatory.

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