equity basics part 2

8/8/2019 Equity Basics Part 2

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Lesson 8


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Depository

A depository is an organization where the securities ofan investor are held in electronic form, at the requestof the investor through the medium of a DepositoryParticipant

If an investor wants to utilize the services offered by a

depository, he has to open an account with thedepository through its Depository Participant. This issimilar to opening an account with any of the branchesof a bank in order to utilize the services of that bank.


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What is dematerialization?

It is process of converting securities from physical forminto electronic form.


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Who is a Depository Participant?

A Depository Participant (DP) is an agent of the depository and is authorizedto offer depository services to investors.

According to SEBI guidelines, financial institutions, banks, custodians,stockbrokers, etc. can become DP with a depository.


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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

theD

P

DP intimates customers status of holdings or transactions from time totime

Who is a Depository Participant?


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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 regulatingauthority.


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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 physicalsecurities

Safekeeping of securities


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Services offered by a DP

Account Opening & Maintenance

Dematerialization of Securities

Rematerialization of Securities

Transfer of Securities

Pledging of Securities


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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 andfro, from Exchange or Clearing Corporation.

All the securities received in the pool account should be transferred to therespective beneficial accounts within 24 hrs.


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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 ofcertificate to be done by putting a stamp Surrendered forDematerialization.


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Demat Requisition Form


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Dematerialization process

Client submits DRF and physicalcertificates to DP

DP intimates to depository and sendscertificates with DRF to R&T agent

R&T agent confirms dematerializationto depository

Depository credits securities tobeneficial owner

Investor DP

R & T AgentDepository


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Dematerialization Process

How many copies ofDRF are made and who all get them?

3 Copies

Client / Account Holder

Depository participant

R & T agent


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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 besettled mutually between the two parties, shares moves from one account toanother


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Delivery Instruction Slip- NSDL


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Settlement of market trade

Seller gives delivery instructions toDP to move securities to brokersaccount

Securities are transferred to

clearing corporation from brokersaccount

On pay out securities are movedfrom Clearing corporation to buyingbrokers account

Buying broker credits buyersaccount

Buyer

Broker

Seller

Broker

ClearingCorporation


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Off market trade

Seller gives Delivery Instruction tohis DP

Securities are transferred fromsellers DP to Buyers DP

Buyer gets credit automaticallyinto his account

Buyer

DP1

Seller

DP2

Depository


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Who can open a demat account?

Individuals,NRIs,Minors,HUFs,Trusts (Regd), Corporates can open demataccount.

Proprietary firms,partnership firms and unregistered trusts cannot open ademat account as the Companies Act,1956 prohibits these entities from

becoming shareholders of companies


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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


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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


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CDSL charges

DP Transaction

Credit charges Nil

Debit charges

0.05%(Minimum Rs.15 and Maximum Rs. 100) per debit transaction

OR

Rs.600 per annum to be charged upfront (no charges fordebit transaction)

Other Charges

Pledge creation Rs.25

Pledge closure Rs.25

Dematerialization

Per Certificate Rs.10

Postal charges per request Rs.40Rematerialization


Postal charges per request Rs.40

Rejection/ Failure per entry Rs.50


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NSDL charges

DP Transaction

Credit charges Nil

Debit charges 0.05% ( Minimum Rs.15 and Maximum Rs. 100) per debit transaction

Other Charges

Pledge creation Rs.50

Pledge closure Nil

Dematerialization



Rematerialization



Rejection/ Failure per entry Rs.50


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Frequently used terms

Margin Money Bull and Bear

Settlement Cycle

Squared transaction

Delivery Transaction

Prices- Last traded price, closing price, opening price, average price

Pay-in and Pay-out

Bid and Offer

Short-selling

Long position

Auction

Settlement Number


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Lesson 9


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Rights issue

Rights Issue is when a listed company which proposes to issue freshsecurities to its existing shareholders as on a record date.

The rights are normally offered in a particular ratio to the number ofsecurities held prior to the issue and generally issued at a price lower than

the currently traded market price of the share


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Preferential issue

A Preferential issue is an issue of shares or of convertible securities bylisted companies to a select group of persons which is neither a rightsissue nor a public issue.

This is a faster way for a company to raise equity capital.


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Private Placement

A Private Placement is the issue of securities;debt or equity, to a limitednumber of subscribers such as banks,financial institutions,mutual fundsand high net worth individuals.

Private placement can be done with a maximum of 50 investors.


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Thank You

equity basics part 2

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