THE SECURITIES CONTRACTS

(REGULATION) ACT, 1956

INTRODUCTION
In
order
to
prevent
undesirable
transactions in securities and to regulate
the working of stock changes in the
country, the central government enacted
the Securities Contracts (Regulation) Act
in 1956.
It came into force on February 20, 1957.
The Act applies to the whole India

SECURITIES
Shares, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other
body corporate;
Government securities;

Such other instruments as may be declared by the central government

to be securities;

Derivative (derivative includes a security derived from a debt

instrument, share, loan whether secured or unsecured, risk instrument
or contract for difference or any other form of security);

Units of any other instrument issued by any collective scheme to the

investors in such schemes;

Rights or interests in securities;

RECOGNISED STOCK EXCHANGES

Stock exchange means any body of

individuals, whether incorporated or
not, constituted for the purpose of
assisting, regulating or controlling
the business of buying, selling or
dealing in securities. [Sec 2(j)]

A stock exchange performs a vital function in the economic

activity of a country. By encouraging people to save and
invest, the stock exchange helps the capital formation which
is essential ingredient for quicker industrial development.
The Securities Contracts (Regulation) Act, 1956 provides
that only those stock exchanges which are granted
recognition by the Central government can function in India.
No person shall, except with the permission of the Central
Government, organise or assist in organising or be a
member of any stock exchange (other than a recognised
stock exchange) for the purpose of assisting in, entering into
or performing any contracts in securities.

RECOGNISED STOCK EXCHANGES

Application for reorganisation of stock exchange
Grant of recognition of stock exchange
Withdrawal of recognition
Government control over trading methods
Power of recognised stock exchange to make rules
restricting voting rights
Power of central government to direct rules to be made
or to make rules.
Power of recognised stock exchanges to make bye-laws.
Power of Securities and Exchange Board of India to
make or amend bye-laws of recognised stock
exchanges.
Nominees of SEBI on governing body