DEPOSITORY

By, Dileep Ninan (1616) Moncy Kuriakose(1635)

INTRODUCTION
Earlier settlement was inefficient Form of physical certificate Delays, theft, bad deliveries

DEPOSITORIES
Organization where the securities are held Electronic form Two depositories NSDL CDSL

FUNCTIONS OF DEPOSITORY
Services to investors Services to participants in capital market Account opening Dematerialization Rematerialization Settlement of trades

BENEFITS OF DEPOSITORY SYSTEM

Eliminate paper work Risk of bad deliveries, fraud, lost of share certificate will not exist Shorten settlement time Capital market will be more transparent

CLEARING HOUSE
Financial institution that provide clearing and settlement services Settle trades efficiently and with minimum paperwork NSCCL ( national securities clearing corporation of India limited)

DEPOSITORY PARTICIPANT
Agent of the investor Intermediaries between the depository and investor Directly deal with customer Functions like securities bank Account opening Facilitates dematerialization Settles trades in electronic segment

DEMATERIALIZATION Process by which physical share certificates are converted into equivalent electronic format Investor submit DRF and physical certificates to DP Demat request sent NSDL Dispatches physical certificates and DRF to R&T agent If R&T agent satisfied then dematerialization confirmed to NSDL NSDL credits the dematerialized securities DP issues statement of transaction to investor

REMATERIALIZATION
Changing demat form to physical form Submit RRF to DP DP forward to depository Depository intimates registrar and transfer agent Agent will print and dispatch physical certificates

REGISTERED OWNER AND BENEFICIARY

OWNER Only two registered owner Depositories - NSDL and CDSL Beneficiary owners are the people who are holding the securities

ISSUER
Legal entity that develops, registers and sells securities It may be domestic govt., corporation or investment trust Securities issued are stock, bonds, debentures, notes, bills and derivatives

REGISTRAR
Maintains records of who owns individual shares or bonds Fee paid by the issuer Ensure that shares and bonds are authentic

TRANSFER AGENT
To keep track of individuals that own company's stock Most transfer agents are banks or trust companies Three main functions: Issue and cancel certificates to reflect changes in ownership Act as intermediary for the company Handle lost, destroyed or stolen certificates

TRADING AND SETTLEMENT OF SHARES

Most important functions of the depositories is transfer of shares. It basically means transfer of ownership from the seller to the buyer at the instruction of the account holder. Transfer can arise out of Off market trades and Market trades

SETTLEMENT OF OFF-MARKET TRADES

Step: 1 Seller gives delivery instructions to his DP to move securities from his account to the buyers account. Step: 2 Buyer automatically receives the credit of the securities into his account on the basis of standing instruction for credits. Step: 3 Buyer receives credit of securities into his account only if he gives receipt instructions, if standing instructions have not been given. Step: 4 DP needs to be extra careful in verifying the signature of the client if large quantities of securities are being debited to the account. Step: 5 Funds move from buyer to seller outside the NSDL system.

CONTD
In case of Off-market trades, all the funds related settlements are made outside the system of NSDL and NSCCL. Only the transfer of securities is done through the NSDL channel.

SETTLEMENT OF MARKET TRADES

Market trades include all the trades done through the NSE system. Even the trades done through negotiation, wherein the buyers and sellers fix a deal on their own but want that the securities should move through the NSDL system The clearing and settlement through the NSCCL will also be a part of market trades.

CONTD
Step: 1 Seller gives delivery out instructions to his DP to move securities from his account to his brokers account. Step: 2 Securities are transferred from brokers account to CC on the basis of a delivery out instruction. Step: 3 On the pay-out day securities are moved from CC to buying brokers account. Step: 4 Buying broker gives instructions and securities move to the buyers account.

THE DEPOSITORIES ACT, 1996

An Act to provide for regulation of depositories in securities and for matters connected therewith or incidental thereto. It extends to the whole of India. It shall be deemed to have come into force on the 20th day of September, 1995.

THANK YOU..