The ministry of finance vide Notification dated 18th October, 2019 issued under section 2 of the Securities Contracts (Regulation) Act, 1956, has declared that Contracts conferring right to buy or sell or a right to buy or sell in future, underlying goods qualifies as a derivative under the Act.
Securities Contracts (Regulation) act 1956, under Section 2(ac)(B) recognizes ‘a contract which derives its value from the prices, or index of prices, of underlying securities’ as a derivative. Notification number S.O. 3068(E), dated the 27th September, 2016, enlists the ‘underlying goods.’
The new notification states that a contract for the purchase or sale of a right to buy or sell or a right to buy and sell in future, such underlying goods, can be treated as a derivative for the purposes of the said SCRA Act. Such contact can be traded as a derivative in the derivative exchange and the value of same will be derived from value of the underlying goods.
Click here to see the Notification
