Lecture 3 Investment Basics Stock Exchange_ Depository.ppt
- 2. Learning Objectives • What is meant by a Stock Exchange • What is a Depository
- 3. • Stock Exchange: – Any body of individuals, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. – Regional or National. – A platform to trade financial tools during specific hours of any business day adhering to SEBI’s well-defined guidelines. – However, only those companies who are listed in a stock exchange are allowed to trade in it.
- 4. • Stock Exchange: – Exchanges can be either physical or electronic, but electronic exchanges are now the norm. – Connect buyers and sellers, and to bring stability, transparency, and efficiency to the trading process. – Historically, stock exchanges were primarily physical spaces with men standing on a floor yelling buy and sell orders.
- 5. • Stock Exchange: – When a company is "listed" on an exchange, that means the company can be traded on it. – Listing requirements vary by exchange, but include meeting minimum criteria, such as number of shareholders, earnings, and stock price. – In return for meeting these requirements, companies enjoy the prestige of being on a major stock exchange. Being listed on a popular exchange gives companies visibility within the global marketplace.
- 6. • Purpose of Stock Exchange: – Raising Capital – Corporate Governance – Economic Efficiency • Benefits of Stock Exchange: – Increased Value – Collateral value – Liquidity – Fair price
- 7. • Investment Methods – Primary market – Secondary market
- 9. • Equity Share • Debt Instrument (Bond, Debenture) • Derivative ( equity, index, currency, commodity) • Mutual Fund • Index
- 10. • Depository is a place where financial securities are held in dematerialised form. • It is responsible for maintenance of ownership records and facilitation of trading in dematerialised securities. • However, a Depository Participant (DP) is described as an Agent (law) of the depository. Concept of depository and dematerialization
- 11. • They are the intermediaries between the depository and the investors. • The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. • In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act.
- 14. Process of dematerialization • Demat account • A Demat account or dematerialised account converts the shares from the paper form into an electronic form. They are similar to pass books offered by the banks where you have opened an account. You can easily buy or sell shares of different companies using your Demat account. All the transactions are entered into it akin to the bank passbook.
- 15. How to open de-mat account How to open a Demat Account? In order to open a Demat Account the interested candidate has to follow these general instructions: • The interested candidate has to approach a Depository participant (DP) who is registered with the National Securities Depository Ltd. (NSDL) and the Central Depository Services Ltd. (CSDL). The sole function of the DP is to act as an intermediary between the investor and the depository. • Then the relationship manager from the DP that you have approached provides you with an application form that you need to fill and deposit with them. Some documents like identity and address proof are mandatory requirements and can’t be bargained with. The interested candidate needs to produce an original PAN card during the process of account opening. • Once the documentation is over, the DP who is basically a stock brokerage firm, bank, sub-broker etc. (e.g.INDIABULLS, ShareKhan, IIFL, ICICI etc.) demands a minimum cheque in your name in case you want to start with purchase of shares. DP purchases dematerialised shares in your name and saves them in your Demat Account and charges a minimum brokerage.
- 16. Process of De-mat • Dematerialization starts with opening a Demat account. For demat account opening, you need to shortlist a Depository Participant (DP) that offers Demat services. • To convert the physical shares into electronic/demat form, A Dematerialization Request Form (DRF), which is available with the Depository Participant (DP), has to be filled in and deposited along with share certificates. On each share certificate, 'Surrendered for Dematerialization' needs to be mentioned. • The DP needs to process this request along with the share certificates to the company and simultaneously to registrars and transfer agents through the depository
- 17. • Once the request is approved, the share certificates in the physical form will be destroyed and a confirmation of dematerialization will be sent to the depository • The depository will then confirm the dematerialization of shares to the DP. Once this is done, a credit in the holding of shares will reflect in the investor's account electronically. • This cycle takes about 15 to 30 days after the submission of dematerialization request • Dematerialization is possible only with a Demat account, Learn about how to open a demat account to understand dematerialization.