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DEPOSITORY system

An Organisation that holds securities of


investor in electronic format at the request of
the investor through a registered Depository
Participant.
Diff b/w Bank & Depository

BANK DEPOSITORY
Holds Funds in an Account Hold securities in an account
Transfers Funds between accounts Transfers securities between
on the instruction of the account accounts on the instruction of the
holder. account holder
Facilitates transfers without having Facilitates transfers of ownership
to handle money without having to handle securities
Facilitates safekeeping of money Facilitates safekeeping of shares
No. of Depositories registered with SEBI
National Securities Depository Limited (NSDL):-the
largest depository of Indian stocks.
Trades done is NSE - National Stock Exchange are
linked directly to NSDL.

Central Depository Services Limited (CSDL)-Bombay


Stock Exchange are linked directly to CDSL.
DEPOSITORY PARTICIPANT

An agent of the depository through which it interfaces with the


investor. A DP can offer depository services only after it gets
registration from SEBI.
D.Ps registered with SEBI

CDSL: 619

NSDL:359
Benefits of availing depository services
Safe & convenient
Immediate transfer of securities
No stamp duty for transfer of securities
Elimination of risks with physical certificates
Reduction in paper work & transaction cost
Nomination facility
Change in address gets automatically updates with all companies
Automatic credit in demat accounts
Dematerialization
Process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic
form and credited in to the investors account with his/her
DP
Process
Fill in a Demat Request Form (DRF) available with the DP and submit with
physical certificates. Separate DRF should be filled for each ISIN no.
DP intimates Depository of the request through the system
DP submits the certificates to the registrar
Registrar confirms the demat request from depository
After dematerializing certificates, registrar updates accounts & informs
depository
Depository updates its accounts & informs DP
DP updates accounts & informs investor
Rematerialization
Converting securities from electronic form to physical form.
Secondary Market
The secondary market, also known as the aftermarket,
is the financial market where previously issued securities and
financial instruments such as stocks, bonds, options, and
futures are bought and sold.
Function
Secondary marketing is vital to an efficient and modern capital
market
In the secondary market, securities are sold by and transferred
from one investor or speculator to another. It is therefore
important that the secondary market be highly liquid
The greater the number of investors that participate in a given
marketplace, and the greater the centralization of that
marketplace, the more liquid the market.
FUNCTIONS

Secondary markets mesh the investor's preference for liquidity (i.e.,


the investor's desire not to tie up his or her money for a long period of
time, in case the investor needs it to deal with unforeseen
circumstances) with the capital user's preference to be able to use the
capital for an extended period of time.
Accurate share price allocates scarce capital more efficiently
Trading
Purchase:
The broker will receive the securities in his account on the payout
day.
The broker will give instruction to its DP to debit his account &
credit investors account
Investor will give receipt Instruction to DP for receiving credit by
filling appropriate form. OR Gives standing instruction for credit
in to ones accounts that will obviate the need of giving Receipt
instruction every time.
Sell

Investor gives Delivery Instruction to DP to debit ones


account & credit the brokers account. Such instruction
should reach the DPs office at least 24 hrs before the
pay-in otherwise DP will accept the instruction at the
investors risk.
Delivery Instruction Slip

DIS is filled while giving delivery instruction to the DP. This


is similar to the cheque book of a bank account.