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Section 18A of the SCRA sets out the conditions under which a contract in derivatives is legal and valid. Which combination of conditions must be satisfied?
Answer & Solution
Correct answer: D.
1. Section 18A overrides every other law for derivatives validity.
2. A derivative contract must be traded on a recognised stock exchange.
3. It must be settled on the clearing house of that exchange or per its rules and bye-laws.
4. It must be between such parties and on such terms as the CG may notify in the Official Gazette.
5. The other combinations involving RBI, IRDAI or income-tax reporting are not the SCRA tests.
_Source: ICSI CS Executive Paper 6 (Securities Laws and Capital Markets) — Lesson 1: Securities Contracts (Regulation) Act, 1956, pp. 4-21._
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