The National Commodity & Derivatives Exchange Limited (NCDEX) on June 25, 2026, issued clarification to Rule 8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957.
The Department of Economic Affairs, Ministry of Finance, through an amendment published on May 19, 2025, has modified Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957. The amendment clarifies that investments made by a trading member (broker) will not be treated as “business activity,” provided such investments do not involve client funds or securities and do not create any financial liability on the broker. This provides greater clarity on permissible proprietary investment activities of members.
However, the proviso also sets clear boundaries. If investments involve the use of client funds or securities, or are structured in a manner that creates financial obligations or liabilities for the broker, such activities will be considered as business and may lead to non-compliance under the rules. This ensures protection of client assets and limits risk exposure arising from brokers’ external financial arrangements.
The notification further highlights certain illustrative activities that would be treated as violations. These include issuing corporate guarantees for loans taken by group entities (such as subsidiaries or associates) and pledging deposits with banks to secure overdraft facilities for such entities. These actions create contingent liabilities and are therefore not permitted under the amended provisions.
Members are advised to strictly comply with the revised rules and avoid any arrangements that may indirectly expose client funds or create financial liabilities. Additionally, detailed FAQs outlining other non-compliant activities, as per SEBI and Exchange directives, have been provided in Annexure A for further guidance.
[Circular No: NCDEX/MEMBER INSPECTION-020/2026]
