Securities Contract

(Regulation) Act, 1956

A.HASITHA(188W1E0001)
D.MERCY SAILAJA (188W1E0011)
J.SAI SAMPATH (188W1E0021)
M.HEMA SRI (188W1E0031)
LOCHANA (188W1E0041)
T.PURNA KOMALI (188W1E0051)
Objectives
1. To provide for the regulation of stock exchange
2. To provide for the regulation in transactions of securities
3. To prevent undesirable speculation in securities
4. To regulate the buying and selling of securities outside the limits of
stock exchange
5. To provide for ancillary matters
Important Concepts
Additional Trading Floor

It means a

 Trading ring or trading facility

 Offered by a recognized Stock Exchange
 Outside its area of operation
 To enable the investors to buy and sell securities through such trading floor
under the regulatory framework of that Stock Exchange

A Stock Exchange may establish additional trading floor with the prior approval of
SEBI
Important Concepts
Derivative

It includes

1. 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;
2. A contract which derives its value from the prices , or index of prices, of
underlying securities;
3. Commodity derivatives;
4. Such other instruments as may be declared by the Central Government to be
derivatives.
Important Concepts
Securities

It includes

1. Shares, scrips, stocks, bonds, debenture, debenture stock or other

marketable securities of a like nature in or of any incorporated company or
other body corporate
2. Derivative
3. Units or any other instrument issued by any collective investment scheme to
the investors in such schemes
Important Concepts
Securities

4. Security receipt as defined in clause (zg) of section 2 of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

5. Units or any other such instrument issued to the investor under any mutual fund scheme;
6. Any certificate or instrument (by whatever name called), issued to an investor by any
issuer being a special purpose distinct entity which possesses any debt or receivable,
including mortgage debt
Important Concepts
Securities

7. Government securities;
8. Such other instruments as may be declared by the Central Government to be
securities; and
9. Rights or interest in securities
Important Concepts
Spot Delivery Contract

“Means a contract which provides for –

1. Actual delivery of securities and the payment of a price therefor either on the
same day as the date of the contract or on the next day, the actual period
taken for the despatch of the securities or the remittance of money therefor
through the post being excluded from the computation of the period aforesaid
if the parties to the contract do not reside in the same town or locality;
Important Concepts
Spot Delivery Contract

2. Transfer of securities by the depository from the account of a beneficial owner

to the account of another beneficial owner when such securities are dealt with
by a depository.
Important Concepts
Stock Exchange

“Means –
1) Any body of individuals, whether incorporated or not, constituted before
corporatisation and demutualisation under section 4A and 4B, or
2) A body corporate incorporated under the Companies Act, 1956 whether
under a scheme of corporatisation and demutualisation or otherwise,
For the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities
Concept of Stock Exchange
 Stock Exchanges constitute the primary institution of secondary market.
 Stock Exchanges represent the market place for buying and selling of
securities and ensuring liquidity to them in the interest of the investors
 There are 23 recognized stock exchanges in India
 All of them are regulated in terms of Securities Contracts (Regulation)
Act,1956 and The SEBI Act,1992 and the rules and regulations made there
under
 The Stock Exchange are managed by the Board of Directors or Council of
Management consisting of elected brokers and representatives of
Government and public appointed by SEBI
Corporation of Stock Exchange
 Corporation of Stock Exchange is the process of converting the organization
structure of the Stock Exchange from a non-corporate structure to a corporate
structure
 Traditionally, some of the Stock Exchanges in India were established as
association of persons such as Bombay Stock Exchange
 Corporation of such exchanges is a process of converting them into
incorporated companies
Demutualization of Stock Exchange
 Demutualization refers to transition process of an Exchange from mutually
owned association to a company owned by shareholders
 In other words, transforming the legal structure of an exchange from a mutual
form to a business corporation form is referred as Demutualization
 The above in effect means after demutualization the ownership, the
management and the trading rights at the Exchange are segregated from
each other
Demutualization of Stock Exchange
Membership of Stock Exchange
 Membership of Stock Exchange generally given to persons who are
financially sound and who have adequate experience and training in the
Stock Exchange
 Their enrolment as member is regulated and controlled by SEBI to whom they
have to pay an annual charge
 A member of the Stock Exchange is called broker who can transact on behalf
of the client as well as on his own behalf
 He can also take the assistance of sub-broker, whom he can appoint under
the procedure of registration
Trading procedure of Stock Exchange
1. Selection of a Broker
2. Opening Demat Account with Depository
3. Placing the Order
4. Executing the Order
5. Settlement
Trading procedure of Stock Exchange
 Trading takes place regularly on each weekday except Saturdays, Sunday
and notified holiday
 Stock Exchange used to have extra sessions for special occasions like Diwali
etc.
Recognized Stock Exchange
 Means a stock exchange which is for the time being recognised by the
Central Government under section 4.
Application for Recognition
Section 3,4 and 5
1. Any stock exchange, which is desirous of being recognised for the
purposes of this Act, may make an application in the prescribed manner
to the Central Government (powers delegated to SEBI also)
Recognized Stock Exchange
Application for Recognition
Section 3,4 and 5

2. Every application under sub section (1) shall contain such particulars as may
be prescribed, and shall be accompanied by a copy of the bye-laws of the stock
exchange for the regulation and control of contracts and also a copy of the rules
relating in general to the constitution of the stock exchanges and in particular, to
Recognized Stock Exchange
a. The government bogy of such stock exchange, its constitution and
powers of management and the manner in which its business is to be
transacted;
b. The powers & duties of the office bearers of the stock exchange
Recognized Stock Exchange

 The procedure for the registration of partnerships as members of stock

exchange in cases where the rules provide for such membership; and the
nomination and appointment of authorized representatives and clerks.
Grant of Recognition to Stock Exchanges
If the Central Government (or SEBI) is satisfied, after making such inquiry as may
be necessary in this behalf and after obtaining such further information, if any, as it
may require, -

1) That the rules and bye-laws of a stock exchange applying for registration are
in conformity with such conditions as may be prescribed with a view to ensure
fair dealing and to protect investors;
Grant of Recognition to Stock Exchanges

2) That the stock exchange is willing to comply with any other conditions
(including conditions as to the number of members) which the Central
Government (or SEBI), after consultation with the governing body of the stock
exchange and having regard to the area served by the stock exchange and its
standing and the nature of the securities dealt with by it, may impose for the
purpose of carrying out the objects of this Act, and
Grant of Recognition to Stock Exchanges

3) That it would be in the interest of the trade and also in the public interest
to grant recognition to the stock exchange;
it may grant recognition to the stock exchange subject to the conditions
imposed upon it as aforesaid and in such form as may be prescribed.
Grant of Recognition to Stock Exchanges

Grant of recognition shall be published in the Gazette of India and also the
Official Gazette of the State in which the principal office of Stock Exchange is
situated.