equity basics part 2
TRANSCRIPT
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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
Per Certificate Rs.15
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
Per Certificate Rs.15
Postal charges per request Rs.40
Rematerialization
Per Certificate Rs.15
Postal charges per request Rs.40
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