What is Depository Service? Explain the participants of this service.

Meaning: It refers to that service through which the transfer of ownership in shares takes place by means of book entry without the physical movement of shares. Participants:

(i) The Depository: A depository is an institution which holds the shares of an investor in electronic form. It facilitates transactions in securities simply by means of book entry. At present, there are two depository institutions in India:

— National Securities Depository Limited (NSDL)

— Central Depository Services Limited (CDSL)

(ii) The Depository Participant: A Depository Participant (DP) is an agent of the depository. He functions as a mediator between the issuing company and the investors through the depository. He opens the accounts and maintains the securities account balance of the investors and conveys them the status of their holding from time to time. As per SEBI guidelines, banks, stock brokers, etc. can become depository participants.

(iii) The Investor: He is a person who wants to deal in shares and whose name is recorded with a depository. The investor is the real owner of the shares who has lodged them with the depository through book entry till the day he sells them.

(iv) The Issuing Company: The issuing company is that organisation which issues the securities. The issuing company send a list of the shareholders to the depositories.