Question

Highlight the depository system of trading in shares.

Answer 1

Depository services were introduced recently in the Indian stock market. Today, online (scripless or paperless) trading in company shares has become mandatory. A new trading method was required to ensure the success of this system. Depository service is the mechanism that enables online share trading. In this system, ownership of shares is transferred through book entries without the need for physically handling share certificates.

When an individual wants to trade shares, they must first open an account with a depository through a depository participant. There are four key participants in this system:

1. The Depository
2. The Depository Participant
3. The Investor
4. The Issuing Company