Equity Basics Depository

IIFL Training Team

Depository
A depository is an organization where the securities of an investor are held in electronic form, at the request of the investor through the medium of a Depository Participant

If an investor wants to utilize the services offered by a depository, he has to open an account with the depository through its Depository Participant. This is similar to opening an account with any of the branches of a bank in order to utilize the services of that bank
IIFL Training Team

What is dematerialization?
It is process of converting securities from physical form into electronic form

IIFL Training Team

Who is a Depository Participant?

A Depository Participant (DP) is an agent of the depository and is authorized to offer depository services to investors According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. can become DP with a depository

IIFL Training Team

Who is a Depository Participant?

A DP is an interface between customers and the depository A customer opens an account with a DP and commences operations Balances are maintained with the depository and are available through the DP DP intimates customers status of holdings or transactions from time to time
IIFL Training Team

Depositories in India
Central Depository Services (India) Limited
- Promoted by BSE, BoI, BoB, SBI and HDFC Bank

National Securities Depository Limited (NSDL)

- Promoted by UTI, IDBI and NSE

Securities and Exchange Board of India (SEBI) is the regulating authority

IIFL Training Team

Depository: Bank - an analogy

Bank Holds funds in accounts Transfers funds between accounts Transfers without handling cash Safekeeping of money Depository Holds securities in accounts Transfers securities in accounts Transfers without handling physical securities Safekeeping of securities

IIFL Training Team

Services offered by a DP
Account Opening & Maintenance

Dematerialization of Securities
Rematerialization of Securities Transfer of Securities Pledging of Securities

IIFL Training Team

Types of accounts
Beneficiary Account
These are ownership accounts, for use of Individuals, Corporates, HUFs etc

Pool Account
These are commercial accounts , for use of broker, for transfer of securities to and fro, from Exchange or Clearing Corporation All the securities received in the pool account should be transferred to the respective beneficial accounts within 24 hrs

IIFL Training Team

How are securities dematerialized?

Physical securities are to be submitted to DP, along with DRF Each security certificate should be defaced by the client. Defacing of certificate to be done by putting a stamp Surrendered for Dematerialization

IIFL Training Team

Demat Requisition Form

IIFL Training Team

Dematerialization process
Client submits DRF and physical certificates to DP
Investor DP

DP intimates to depository and sends certificates with DRF to R&T agent

R & T Agent

Depository

R&T agent confirms dematerialization to depository

Depository credits securities to beneficial owner

IIFL Training Team

Dematerialization Process
How many copies of DRF are made and who all get them?
3 Copies
Client / Account Holder Depository participant R & T agent

IIFL Training Team

Trading and settlement

Market Trade
Trade done through a broker on the exchange. Has to be settled through the exchange

Off Market Trade

Trade done between two parties without the involvement of a broker. Has to be settled mutually between the two parties, shares moves from one account to another

IIFL Training Team

Delivery Instruction Slip- NSDL

IIFL Training Team

Delivery Instruction Slip- CDSL

IIFL Training Team

 Seller gives delivery instructions to DP to move securities to brokers account Securities are transferred to clearing corporation from brokers account

Settlement of market trade

Clearing Corporation

Broker

Broker

On pay out securities are moved from Clearing corporation to buying brokers account Buying broker credits buyers account

Buyer

Seller

IIFL Training Team

Off market trade

Seller gives Delivery Instruction to his DP Securities are transferred from sellers DP to Buyers DP Buyer gets credit automatically into his account
IIFL Training Team

Depository

DP1

DP2

Buyer

Seller

Who can open a demat account?

Individuals, NRIs, Minors, HUFs, Trusts (Regd), Corporates can open demat account Proprietary firms, partnership firms and unregistered trusts cannot open a demat account as the Companies Act,1956 prohibits these entities from becoming shareholders of companies

IIFL Training Team

Basic documents for account opening

Registration form

Photograph/s with signatures across it

PAN Card

Proof of residence-Passport, Voters ID card, Driving license, Ration card

Proof of identity-Passport, Voters ID card, Driving license, PAN card Bank Account Proof-Bank statement, cancelled cheque
IIFL Training Team

Depository Charges
DP Annual Maintenance Charges
Life time free (Rs. 555 one time upfront) OR Rs. 250 per annum to be charged from the next financial year

IIFL Training Team

CDSL charges
DP Transaction
Credit charges Nil 0.05% (Minimum Rs.15 and Maximum Rs. 100) per debit transaction

Debit charges

OR
Rs.600 per annum to be charged upfront (no charges for debit transaction)

Other Charges
Pledge creation Pledge closure Dematerialization Per Certificate Postal charges per request Rematerialization Per Certificate Postal charges per request Rs.15 Rs.40 Rs.15 Rs.40 Rs.25 Rs.25

Rejection/ Failure per entry

IIFL Training Team

Rs.50

NSDL charges
DP Transaction
Credit charges Debit charges Nil 0.05% ( Minimum Rs.15 and Maximum Rs. 100) per debit transaction

Other Charges
Pledge creation Pledge closure Dematerialization Per Certificate Postal charges per request Rematerialization Per Certificate Postal charges per request Rejection/ Failure per entry IIFL Training Team Rs.15 Rs.40 Rs.50 Rs.15 Rs.40 Rs.50 Nil

Thank You

IIFL Training Team