The role of depository participants in stock market is very important.
depository participants | Clearing (Finance) | Securities (Finance)
Now a days all kinds of trading works in stock market are being executed through internet and the basis of most part of the entire infrastructure of a depository is constituted in electronic form. In this article I will try to give all out information about how a depository works in the system and what are the privileges, an investor can enjoy while trading in stock market.
Definition of depository Apparently a depository can be equally treated like a bank. Generally we open an account in a bank where our money is kept for giving us their services in money transaction mostly in a transparent way. A depository helps interacting with the investors through its agents which are called Depository Participants DPs.
Such account opened with a DP is known as De materialized account or in short, Demat account. Privileges available in getting registered in a depository The following are the privileges, an investor can avail after his participation in a depository: Securities can be transferred instantly without payment of any stamp duty. It reduces transaction cost and also different types of paper works involved in transfer of securities.
There is provision of declaration of nomination for future protection. Only one nominee is allowed even the nominee may be a minor also.
In the event of any announcements like splitting, consolidations or merging of shares, there are provisions by which these are automatically executed in Demat account.
For the requirement of changing address of an investor with a Depository Participant DP , the change is performed with the help of electronic system and simultaneously it gets registered with all companies as well, whose securities are held by the investor.
It does not require communicating to all the companies separately. All types of investments in equity, debentures, bonds, Government securities are preserved in a single account.
In case of transmission of securities, the same can be executed by the DP without communicating it to respective companies. Any risk involved with physical certificates can be avoided with the help of this electronic system. Facilities offered by NSDL The full form of NSDL is National Securities Depository Limited. The electronic system of trading network is having connectivity between all stock exchanges and the NSDL.
Services of NSDL to investors are provided through DPs. DPs are appointed by NSDL with the approval of SEBI. The full form of SEBI is Security Exchange Board of India. As per SEBI's guidelines Banks, Financial Institutions, Trading members registered under SEBI may act as DPs.
The NSDL offers the following facilities: Physical certificates can be converted into electronic form. Securities in electronic form can be converted into physical certificates.
Repurchasing or redemption of units of mutual funds can be executed easily.Free Demat And Trading Account
There is facility of taking loan by hypothecating or pledging the dematerialized securities. There is provision of receipt of bonus not in cash in electronic form declared by companies. The securities like public issues and right issues can also be credited in electronic form. Demat accounts can be freezed for time being to avoid any debit. There is facility of submission of declaration of nomination for Demat account. Address of an account holder can be changed. Provisions of holding debt instruments in the same account, transmission of securities, lending or borrowing of stock etc are also available.
How to open a Demat account First to select a DP as per one's choice. It can be done by searching websites in the internet where a list of DP is available. A Demat opening form has to be filled up.
Depository participant - Wikipedia
An agreement between the investor and the DP towards duties, responsibilities and rights has also to be executed. For this purpose, the following Xerox copies of documents have to be produced. Proof of Identity which has got a photo pasted viz, Passport, Voter Identity card, Driving License, PAN card etc as asked by DP. Proof of Address viz, Passport, Voter Identity card, Driving License, PAN card current electric bill, current telephone bill etc.
The DP may ask original copies of these documents for verification. Some additional information More than one Demat account can be opened with the same DP as well as in other DPs.
There are no restrictions in this regard. A zero balance account can be be opened. There is no minimum balance limitation. By giving authority for operation of the account and executing a power of attorney, an investor can allow anybody to operate the account.
But this should be taken into the knowledge of the DP concerned. In case of any change in bank account details, the information should be communicated to the concerned DP.
Depository Participants | Depository Participants in India | Financial Gyaan
Like bank account, the Demat account cannot be operated on "either or survivor" principle if it is a joint account. After opening a Demat account neither any name can be included nor any name can be deleted from the account.
If an investor holds more than one Demat account, he may close any one and may place request to the DP to transfer the securities from the closed account to the valid account s. For this purpose, prescribed charges have to be paid. In the event of any irregularities an investor may communicate his grievances to the DP for redressal.
If the DP fails to regularize the issue, the investor may take resort of NSDL and communicate his grievances to the investor grievance cell of NSDL at the address given below: The Officer in Charge, Investor Grievance Cell, National Securities Depository Limited, 4th Floor, Trade World, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - Email: Being the most popular educational website in India, we believe in providing quality content to our readers.
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