Recognised stock exchange (s. 2(92)) (range 4–5)

What the rule says. For section 2(92), a stock exchange must satisfy each of the following in respect of trading in derivatives.

The conditions

• (a) SEBI approval. The exchange has the Securities and Exchange Board of India's approval for trading in derivatives and functions in accordance with SEBI's guidelines or conditions on the subject.
• (b) Client particulars. Client particulars, including the unique client identity number and Permanent Account Number, are recorded and stored in the exchange's databases.
• (c) Audit trail. A complete audit trail of all transactions, in both the cash and the derivative market, is kept on the system for seven tax years.
• (d) No erasure. Transactions in the cash and derivative market, once registered in the system, are not erased.
• (e) Modification only for genuine error. Registered transactions are modified only in cases of genuine error.
• (f) Monthly statement. Data on all modified transactions is maintained, and a monthly statement in Form No. 1 is submitted to the Director General of Income-tax (Systems) within fifteen days of the end of the month to which it relates.

Why it matters. Conditions (b) to (f) are the ones an applicant must confirm in its application under rule 5; condition (a) is supported by attaching the SEBI approval itself.