We have joy in illuminating you that the contents of your organization are among the first ten securities which have been informed by SEBI to be mandatorily exchanged electronic frame with impact from fourth January 1999. We, hence, feel that we should impart to you certain data seeing the Depository System in order to help you in changing over our physical possessions into electronic shape.
Why Depository system?
The trading in the physical segment is full of inefficiencies due to the handling of large volumes of certificates and also involves various other problems like delays in transfer, delay in settlement, loss in transit, forgery certificates, stolen certificates, mutilation of certificates, postal losses, court cases, litigation etc. To overcome these deficiencies, a new system of trading, viz. Depository system was introduced, which facilitates investor to hold securities in electronic form and to trade in these securities. The first depository set up in India is National Securities Depository Limited (NSDL) and is promoted by IDBI, UTI and NSE.
What is Depository?
It is an association which holds your securities in electronic (otherwise called ‘book section’) form, in an indistinguishable way from a bank holds your cash. Further, a depository likewise transfers your securities without really taking care of securities, in the equivalent day as a bank transfers assets without really dealing with money.
1)No risk of loss of share certificates since the shares are credited to your account.
2) No possibility of bad deliveries.
3) Prevents loss, theft, forgery, mutilation of physical certificates.
4) No compelling reason to fasten share transfer stamp as it is a paperless exchanging.
5) No postal/dispatch charges.
6) Fewer brokerage charges.
7) After the settlement, pay in and pay out are around the same time for paperless exchanging which implies you get your securities and money quickly.
8) Scriptless exchanging assigns corporate advantages quicker.
9) Encourages vowing and hypothecation of your securities.
10) Takes out the issue of odd-lot shares.
11) Office to bolt your record in the event that you are abroad.
Who are depositors?
Depositors are the individuals who are authorized by the Securities and Exchange Board of India
(SEBI) to attempt depository capacities i.e. holding and treatment of securities in electronic form. The National Securities Depository Ltd. (NSDL) advanced by UTI, IDBI also, NSE is the principal depository of India. The Stock Exchange, Mumbai has promoted Central Depository Services (India) Ltd. (Cds) which has attracted plans to set up the second depository in the nation.
What are the steps involved in joining the depository system?
There are 3 stages in which an investor can convert his physical certificate into electronic form.
1. Open an account with one of the members of NSDL (A member is a market middle person through whom NSDL connects with the investors).
2. Consent to an Arrangement with the member.
3. Submit Dematerialisation Request form alongside share authentication to the Issuer.
How to we can trade in electronic shares?
The demat section on the National Stock Exchange
When you wish to buy shares from the secondary market, you can likewise get them specifically in the Electronic Form. For this reason, there is a different purchasing and selling electronic shares is much the same as purchasing and selling shares in the physical section. The accompanying methodology is embraced for trading in the electronic section.
1. On the off chance that you want to sell shares in electronic form, you put in a request with your broker under the Demat section and teach your member by the method for a Delivery Instruction (taking after a cheque) to charge your record with the number of shares sold by you.
2. On the off chance that you wish to purchase shares in electronic form, you should educate your broker about your depository account number with the goal that electronic shares purchased by you are credited into your account and teach your member by the method for Receipt Instruction to get credit in your account.
3. Instalment for the shares purchased or sold in depository mode is made in an equivalent way as in the physical securities.
4. The shares you have purchased are transferred in your name the precise following day of payout with no danger of bad deliveries. No conventions of filling transfer deed, joining share transfer stamp and so on is required to be followed.