DEPOSITORY SYSTEM
The term depository is defined as ‘a central location for keeping securities on deposits’.it is also defined as ‘a facility for holding securities’,either in certificated form to enable book entry transfer of securities’.
Hence, a Depository is an organization,which assist in allotment and transfer of securities,and securities lending.the shares in a depository are held in the form of electronic accounts,i.e.,in dematerialised form and the depository system revolves around and the concept of paper-less trading.
Therefore,a depository can be defined as,an institution which transfers the ownership of securities in electronic mode on behalf of its members”.
A depository is a nominee who keeps the scrips on behalf of the investors.He undertakes the custodian role.The depository leads the capital market towards a scripless systemthrough immobilization and dematerialisation of share certificates.Immobilization of securities means stopping the physical movement.the number physical certificates that pass between companyand customers becomes negligible as lodged and mobilised certificates are registered in the name of depository nominee.The depository operates thecomputerised book entry transfer for the securities.this results in a speedier and more liquid trading environment.the depository also undertakes the trade and settlement processing through its subsidiary as a part of its function.
In primary market services,the depository through its participant works as a link between issuers and prospective shareholders.In secondary market,the depository through participants as a link between the investors and dealing house of the exchange to facilitate settlements of the security transactions through book keeping entries.Further, the depository can provide ancillary services like collecting dividends and interests and reporting corporate functions.
OBJECTIVES OF DEPOSITORY:
* Reduce the time for transfer of securities.
* Avoid the risk of...
