12-28-2009, 11:29 PM
The depositories are an important intermediaries in the securities market that is scrip-less or moving towards such a state. In India, the Depositories Act defines a depository to mean "acompany formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration under sub-section (IA) of section 12 of the Securities and Exchange Board of India Act, 1992." The principal function of a depository is to dematerialise securities and enable their transactions in book-entry form.
Dematerialisation of securities occurs when securities issued in physical form are destroyed and an equivalent number of securities are credited into the beneficiary owner's account. In a depository system, the investors stand to gain by way of lower costs and lower risks of theft or forgery, etc. They also benefit in terms of efficiency of the process. But the implementation of the system has to be secure and well governed. All the players have to be conversant with the rules and regulations as well as with the technology for processing. The intermediaries in this system have to play strictly by the rules.
A depository established under the Depositories Act can provide any service connected with recording of allotment of securities or transfer of ownership of securities in the record of a depository. A depository cannot directly open accounts and provide services to clients. Any person willing to avail of the services of the depository can do so by entering into an agreement with the depository through any of its Depository Participants.
There are two Depositories and approximately 390 Depository Participants (DP) are registered with SEBI at present. The two Depositories are:
[b]National Securities Depository Limited[/b]- In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.
[b]Central Depository Services (I) Limited [/b]
The benefits of availing Depository Services are as follows:
A safe, convenient way to hold securities; Instant transfer of securities; Stamp duty is not required on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery , fake securities, Delays, thefts etc.; Reduction in paperwork involved in transfer of securities; Reduction in the cost of transaction, No odd lot problem, even one share can be sold; Facility of nomination; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Credited automatically into demat account of shares , arising out-of bonus or split or consolidation or merger etc.
Dematerialisation of securities occurs when securities issued in physical form are destroyed and an equivalent number of securities are credited into the beneficiary owner's account. In a depository system, the investors stand to gain by way of lower costs and lower risks of theft or forgery, etc. They also benefit in terms of efficiency of the process. But the implementation of the system has to be secure and well governed. All the players have to be conversant with the rules and regulations as well as with the technology for processing. The intermediaries in this system have to play strictly by the rules.
A depository established under the Depositories Act can provide any service connected with recording of allotment of securities or transfer of ownership of securities in the record of a depository. A depository cannot directly open accounts and provide services to clients. Any person willing to avail of the services of the depository can do so by entering into an agreement with the depository through any of its Depository Participants.
There are two Depositories and approximately 390 Depository Participants (DP) are registered with SEBI at present. The two Depositories are:
[b]National Securities Depository Limited[/b]- In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.
[b]Central Depository Services (I) Limited [/b]
The benefits of availing Depository Services are as follows:
A safe, convenient way to hold securities; Instant transfer of securities; Stamp duty is not required on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery , fake securities, Delays, thefts etc.; Reduction in paperwork involved in transfer of securities; Reduction in the cost of transaction, No odd lot problem, even one share can be sold; Facility of nomination; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Credited automatically into demat account of shares , arising out-of bonus or split or consolidation or merger etc.