What is Depository? What are the benefits of Depository System?
A depository is a company which has been granted a certificate of registration under the SEBI Act, 1992, to deal in securities. In simple words, it may be defined as a bank for securities. As a bank holds money for customers, the depository holds securities (i.e., shares and debentures) for the investors in electronic form. An investor can open securities account with a depository, and can withdraw securities. Investor can also instruct the depository to deliver or receive securities on his behalf,
Main Constituents of Depository :
- Issuer: Issuer means the company which is listed with the Depository and whose securities can be traded under demat mode.
- Issuer’s Registrar: The Registrar provides electronic connectivity between the Issuer and the Depository. The de-materialization of securities is done by the Registrar on behalf of the Issuer. It keeps the electronic data of Beneficial Owners.
- Depository Participant (DP): Depository Participant provides services to the investors and acts as a custodian of the electronic accounts of the clients. DP takes care of trading and settlement and acts as an intermediary between Investor and Depository.
- Investors: They are the main beneficiaries of the services provided by the Depository. They are known as Beneficial Owners.