Currency derivative
This query is : Resolved
CA. Jyoti Baid
(Querist)
13 November 2009
Does the definition of derivatives u/s.2(ac) of the Securities Contracts Act, 1956 include currency derivatives?
Regards,
Jyoti
Regards,
Jyoti
CA Ravi Sisodia
(Expert)
13 November 2009
yes, sec.2(aa)
CA. Jyoti Baid
(Querist)
16 November 2009
Section 2(aa) has been changed to 2(ac).
IsCurrency derivative included in that definition
IsCurrency derivative included in that definition
20 July 2024
Under the Securities Contracts (Regulation) Act, 1956, the definition of derivatives was amended from Section 2(aa) to Section 2(ac). The amendment expanded the scope of derivatives to include various financial instruments. However, specifically addressing whether currency derivatives are included in this definition requires understanding the intent and wording of the amended section.
As per the amended Section 2(ac) of the Securities Contracts Act, 1956:
- The definition of derivatives includes "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."
- The inclusion of "any other form of security" is broad and can be interpreted to cover currency derivatives, which are contracts whose value is derived from the exchange rate of two currencies.
- Currency derivatives, such as currency futures and options, are financial contracts whose value depends on the movement of exchange rates between two currencies. They are commonly used for hedging against currency risk in international trade and investment.
- In practice, currency derivatives are regulated under the Securities and Exchange Board of India (SEBI) regulations, which provide guidelines for their trading and settlement.
Therefore, while the specific mention of currency derivatives may not be explicit in the original text, the broad definition of derivatives under Section 2(ac) of the Securities Contracts Act, 1956, suggests that currency derivatives would generally fall under its purview. It is advisable to consult legal experts or regulatory authorities for precise interpretations and compliance requirements regarding currency derivatives in India.
As per the amended Section 2(ac) of the Securities Contracts Act, 1956:
- The definition of derivatives includes "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."
- The inclusion of "any other form of security" is broad and can be interpreted to cover currency derivatives, which are contracts whose value is derived from the exchange rate of two currencies.
- Currency derivatives, such as currency futures and options, are financial contracts whose value depends on the movement of exchange rates between two currencies. They are commonly used for hedging against currency risk in international trade and investment.
- In practice, currency derivatives are regulated under the Securities and Exchange Board of India (SEBI) regulations, which provide guidelines for their trading and settlement.
Therefore, while the specific mention of currency derivatives may not be explicit in the original text, the broad definition of derivatives under Section 2(ac) of the Securities Contracts Act, 1956, suggests that currency derivatives would generally fall under its purview. It is advisable to consult legal experts or regulatory authorities for precise interpretations and compliance requirements regarding currency derivatives in India.
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