Know More About Depository Participants & Their Duties

Like the Reserve Bank of India, wherein you cannot directly open a bank account, similarly, with the stock exchange, it is not possible to directly conduct trade operations. So, the medium that facilitates trade between the stock exchange and the trader is known as a DP or depository participant. DP makes it quite easy for stock exchanges to continue their trading operations and it also permits the traders to choose from various trade options such as starting a free demat account. 

Depository & Depository Participants 

Good examples of DP in our nation include Motilal Oswal, Zerodha, and Globe Capital, to name a few. The work of a DP is indispensable if traders or investors want to trade in securities. To begin with, a depository participant is very much like a financial institute that contains your funds or financial assets. Some DPs charge a nominal amount to open an account with them that is linked to the primary depository. 

In India, we have two prime depositories; the National Securities Depository Limited and the Central Depository Services Limited. As you cannot open a paid or free demat account or a trading account directly with these prime depository bodies, the depository participants fulfill that role. Serving as a faithful agent of the NSDL and CDSL, the DP guides and helps you handle your trading assets quite effectively. 

Sundry Responsibilities of a DP 

• No Paperwork - Before, trading activities used to be handicapped with a huge amount of paperwork, and with investors grappling to keep track of physical assets. Through a DP, all this hassle is eliminated and assets are digitally managed and stored.

 

• No Fraud - Since all DP procedures are done via electronic medium, they are deemed safer and there is minimal threat of fraud or theft of assets as you are not dealing in physical assets anymore. 

• Quick Work - There is rapid work progress with DPs working in a dedicated and transparent way. The entire process of purchasing assets, keeping them, and indulging in trading practices is done quicker than before. 

• Bulk Management - As the DPs conduct all their trading businesses online, managing the affairs and accounts of millions of investors is relatively easy. 

• Asset Management - DPs can include finance agencies, finance companies, and banks. Likewise, Globe Capital is a key DP player that can help in asset management, creating profits and holding onto them. 

Opening a Demat Account, Where & Why? 

In the stock trading world, a demat account is like an entry ticket if you wish to trade in equities and shares. Similar to the working of a bank account, a demat account holds all your trading shares in its custody. There are various factors to consider when opening a demat account. Nowadays most DPs are eager to give out the online link to open a free demat account. 

There are a few salient points to be noted before opening a demat account:

Make sure that your demat account and share trading account are opened with the same brokerage or DP. Most brokers can help you open a demat/trading account rolled into one, so this should not be a big concern. Ensure that your broker is authentic and has a DP license. Also ensure that after selling your shares, you need to give the DIS or debit instruction slip to the broker within a stipulated time, otherwise it may result in losses. 

When your broker and the DP are the same, this whole process is more simplified and easier to handle. You can opt for a digital free demat account and trading account, and offer your registered broker like Globe Capital the power of attorney to do activities such as debiting the demat account when a sale happens and crediting the account when a purchase takes place. By having both the demat account and the trading account under a single roof, you can avoid many hassles.

Why should you connect with a reputed demat and trading platform?

In today’s digital world, most brokerage firms and brokers give same-platform access to your demat as well as the trading account. Seamless activities like bank account funding, debit, and credit to demat accounts, and credits to your bank balance go in the background. All these ensure that your chosen DP has a good working platform with advanced technology to smoothen the whole demat process. When such measures are taken by your DP, whenever you sell your shares, the dreamt account gets debited the very next day and similarly, when you buy shares, the demat account will get credited in two days. 

How to calculate the sum of demat charges?

DPs often advertise about free opening of trading or demat accounts. Account opening charges are only one among the several charges, you also have to deal with the AMC or the annual maintenance charge every year. It is also dependent on the share value in custody. Every time you sell some shares and they are debited to your demat account, the DP is obligatory for charges to be paid to the primary depository like the NSDL, which is later debited from your account. 

If you request a physical statement, your broker will also charge for it and any other duplicate holdings or transactions-related data wanted as proof. If your DIS is rejected due to technical errors, you are charged with a penal charge. Moreover, if you do the total cost calculator of your demat account, you must take into consideration all the above-mentioned charges to get a fair picture. 

Service Standards Maintained by the DPs

Be vigilant about fraudulent practices, and do not open a free demat account with a DP that is already dealing with many service-level complaints (shown pending with SEBI). It is not a very robust sign and you need to keep your distance from such parties. Also, make sure that there are no regulatory investigations against a DP you are wanting to have as your trading partner. You can scour the online social media links for any negative reviews about DP services. Always choose the most trusted and well-established DP partners such as Globe Capital for your trading activities.