Section 4 of SCRA : Section 4: Grant Of Recognition To Stock Exchanges

Explanation using Example

Imagine that a new stock exchange, named "FuturExchange," is being set up in a major city. Before it can operate, it needs to be officially recognized by the Central Government. The founders of FuturExchange submit their application for recognition under Section 4 of The Securities Contracts (Regulation) Act, 1956.

The Central Government begins its inquiry and finds that FuturExchange has established rules and bye-laws that promote fair dealing and protect investors, as required by clause (a) of Section 4(1). These rules include strict measures against insider trading and mandatory disclosure of information by listed companies.

FuturExchange also agrees to comply with additional conditions imposed by the Central Government, such as limiting the number of members to ensure proper regulation and oversight, as mentioned in clause (b).

Moreover, the Government believes that granting recognition to FuturExchange will benefit the trade by providing a modern trading platform with innovative technology, and it will also be in the public interest by offering more investment opportunities, as outlined in clause (c).

Consequently, the Government decides to grant recognition to FuturExchange, subject to the conditions discussed. This decision is published in the Gazette of India, as per sub-section (3), and FuturExchange can commence operations from the date of publication.

Had the application been refused, Section 4(4) ensures that FuturExchange would have the opportunity to be heard before the final decision, and the reasons for refusal would be communicated in writing.