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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

Which statement about the regulation of derivatives contracts under Indian securities law is correct?

Derivatives are deemed securities under the Securities Contracts (Regulation) Act, 1956, and are valid only when traded on a recognised stock exchange. SEBI regulates them, so over-the-counter equity derivatives are not freely permitted and the RBI is not the sole regulator.

  1. ADerivatives are valid only if traded on a recognised stock exchange, as per the Securities Contracts (Regulation) Act, 1956Correct
  2. BDerivatives are not securities and are outside SEBI's jurisdiction
  3. COver-the-counter equity derivatives are freely permitted between any parties
  4. DDerivatives trading is regulated solely by the RBI

Explanation

The SCRA defines securities to include derivatives, and such contracts are legal and valid only when traded on a recognised stock exchange, with SEBI regulating the market. The other statements contradict this.

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