NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment
Under the Securities Contracts (Regulation) Act, 1956, which of the following is a feature of a derivative contract in the definition of 'securities'?
A derivative under the SCRA is a contract whose value is derived from the price, or index of prices, of underlying securities. It is not tied to physical delivery, off-exchange trading or voting rights in the underlying company.
- AIts value is derived from the price of an underlying securityCorrect
- BIt can be settled only by physical delivery of the underlying
- CIt can be traded only off the exchange
- DIt carries voting rights in the underlying company
Explanation
The SCRA defines a derivative as a contract whose value is derived from the prices or index of prices of underlying securities. Derivatives need not be physically settled, are traded on recognised exchanges, and carry no voting rights.
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