The Securities Contracts (Regulation) Act, 1956 (SCRA) is an Act of the Parliament of India, enacted to prevent undesirable transactions in securities by regulating the business of dealing in them. It is one of the foundational laws for the Indian capital markets and came into force on February 20, 1957. The Act was created to solve the problem of unregulated and speculative trading by establishing a legal framework for the control and supervision of stock exchanges and securities contracts.
The SCRA works primarily by regulating three areas: stock exchanges, contracts in securities, and the listing of securities. A key mechanism is the requirement for stock exchanges to obtain and maintain recognition from the Central Government or the Securities and Exchange Board of India (SEBI) under Section 3. The Act grants the Central Government and SEBI powers to oversee stock exchanges, including the power to call for periodical returns under Section 6 and to supersede the governing body of a recognised stock exchange under Section 11. It also mandates the corporatisation and demutualisation of recognised stock exchanges under Section 4A and Section 4B. The Act defines critical terms like "securities," which includes shares, bonds, and derivatives, and makes contracts in securities enforceable only if they comply with the SCRA.
The SCRA is intrinsically connected to the broader regulatory structure, particularly the Securities and Exchange Board of India Act, 1992, which established SEBI as the primary regulator for the securities market. The powers of the Central Government under the SCRA have largely been delegated to SEBI. The Act has been subject to numerous amendments, including the insertion of a new definition for a pooled investment vehicle via the Finance Act, 2021. More recently, the Securities Contracts Regulation Rules, 1957 (made under the Act) were amended in August 2024 to facilitate the direct listing of securities by public Indian companies on international exchanges in the GIFT IFSC by reducing the minimum public offer and continuous listing requirements to 10%. The core structure of regulating stock exchanges and contracts has remained, while the regulatory authority has shifted and the scope has expanded to include new financial instruments and international market access.