What is Depository?
A depository is an organization which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered depository participant. It also provides services related to transactions in securities.
How is a depository similar like bank?
It can be compared with a bank, which holds the funds for depositors. A bank - depository analogy is given as follows:
Bank - holds funds in an account
Depository - holds securities in an account
Bank - transfers funds between accounts on the instruction of the account holder
Depository - transfers securities between accounts on the instruction of the BO account holder
Bank - facilitates transfer without having to handle money
Depository - facilitates transfer of ownership without having to handle securities
Bank - facilitates safekeeping of money
Depository - facilitates safekeeping of securities
How many depositories are registered with SEBI?
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.
Their addresses are:
National Securities Depository Limited (NSDL)
Trade World, A wing, 4th & 5th Floors, Kamala Mills Compound,
Lower Parel, Mumbai 400013
Tel: (022) 2499 4200 (60 lines)
Fax: (022) 24976351
Email: info@nsdl.co.in
Central Depository Services (India) Limited (CSDL)
Phiroze Jeejeebhoy Towers,
16th Floor, Dalal Street
Mumbai 400001
Phone: 91-22-22723333
Fax: 91-22-22723199/22722072
Email: investors@cdslindia.com
Who is depository participant (DP) & who can be a DP?
A DP is an agent of the depository through which it interfaces with the investor and provides depository services.
Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations / clearing houses, NBFCs and registrar to an issue or share transfer agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a bank branch whereas depository services can be availed through a DP.
Bank - facilitates safekeeping of money Depository - facilitates safekeeping of securities
The financial markets are markets which facilitate the raising of funds or the investment of assets, depending on viewpoint. They also facilitate handling of various risks. The financial markets can be divided into different subtypes: Capital markets consists of:
- Stock markets, which facilitates equity investment and buying and selling of shares of stock. Bond markets, which provides financing through the issue of debt contracts and the buying and selling of bonds and debentures.
- Money markets, which provides short term debt financing and investment..
- Derivatives markets, which provides instruments for handling of financial risks.
- Futures markets, which provide standardized contracts for trading assets at a forthcoming date.
- Insurance markets, which facilitates handling of various risks.
- Foreign exchange markets.
A stock market is a market for the trading of publicly held company stock and associated financial instruments (including stock options, convertibles and stock index futures).
Many years ago, worldwide, buyers and sellers were individual investors and businesspersons. These days markets have generally become "institutionalized"; that is, buyers and sellers are largely institutions whether pension funds, insurance companies, mutual funds or banks. This rise of the institutional investor has brought growing professionalism to all aspects of the markets.
The capital market framework consists of the following participants:
- Stock Exchanges
- Market intermediaries, such as stock-brokers and Mutual Funds
- Investors
- Regulatory institutions (e.g. SEBI)
The general theory goes that the higher the profit, the greater the risk. Since there is scope for high profit in the Stock Market, investing in the Stock Market can be risky. In fact, more than 80% of the people who put money in the market lose it and a majority of the rest are barely able to protect themselves from losses. Only a minuscule minority of investors are able to garner any substantive profits.
One cannot buy directly from the market or stock exchange. A buyer has to buy stocks or equity through a Stock Broker, who is a registered authority to deal in equities of various companies. In effect a lot many intermediaries might come in between the buyer and seller, as brokers do their business through many sub-brokers and the like.