Bill on derivatives tabled in LS

The Securities Contracts (Regulation) Amendment Bill inserts in the original Act a clause widening the definition of derivatives to include "a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security."

They would also include a contract which derives its value from the prices or index of prices of underlying securities.

The statement of objects and reasons of the Bill said in the last few years there had been substantial improvement in thefunctioning of the capital market. As the market grows, there is a demand for different instruments which would enable the investors to diversify as well as control the different risks in the capital market.

The new instruments in capital market would not only help in diversification of risks but also strengthen and deepen the cash market. Thus there is an urgent need to include the derivatives as securities in the SCRA, 1956, whereby trading in derivatives may be possible within the framework of that Act. It added that recently many companies especially plantation companies had been raising capital from investors through collective investment schemes.

However, there is no regulatory framework to allow an orderly development of this market.

In order that the interest of investors is protected, it has been decided that the Sebi would frame regulations with regard to collective investment schemes.

The statement also said that it is also proposed to substitute Section 29 A of the Act relating to thedelegation of powers. At present, powers can be delegated to Sebi.