What are the various constituents and concepts in Depository system?

1.      Depository: - 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 of the investors, who keeps the shares on their behalf. Therefore, the depository acts as a custodian of securities

2.      Depository participant: -Depository participant is the representative of the Depositor. Depository participant acts as intermediary between investors and depositories. An investor has no direct access to the Depositaries. The investor has to trade his securities/share through the Depository Participant. The depository participant has an identity number for identification. It has to maintain accounts of securities of each investor. Depository Participant gives intimation about holdings from time to time by sending a statement of holding or giving a pass-book. If investor desires the services of Depository, he has to open an account with Depository through a Depository Participant. At present in India, there are two depositories. They are
·         National Securities Depositories Limited (NSDL)
·         Central Depositories Services Limited (CDSL)

3.      Beneficial owner: -An investor is known as 'beneficial owner'. He is the person in whose name Demat account is opened. His name is recorded with the depository. He enjoys the rights and benefits of a member such as to get dividend, to get bonus shares, to vote at meeting.

4.      Issuer Company: -It is a company which makes an issue of securities. It must register itself with a depository.

5.      Dematerialisation: -it is the process in which share certificate are converted into electronic form.

6.      Fungibility: -The shares in depositories are fungible. They don't have distinctive number for identification.

7.      Rematerialisation: -Rematerialisation is the process by which shares in electronic form are reconverted into physical form.

8.      International Securities Identification Number (ISN): -it is an identification number given to a security of an issuer company at the time of admitting such security in the depository system.