CHAPTER-1

OBJECTIVES
1.1 Objectives

The objectives of my research project have been-

1. To know the types of Depositories in India.

2. To know the roles of depositories in E-Trading.

3. To know the benefits of depositories.

4. To know the advantages of online trading.

5. To know the online services provided by NSDL to their BO's.

5. To know the online services provided by CDSL to their BO's.

1
CHAPTER-2
RESEARCH METHODOLOGY

2.1 Meaning of Research

Research in simple terms, refers to a search for knowledge. It is also known as a scientific
and systematic search for information on particular topic or issue. According to Redman
and Mory (1923), defined research is a "systematized effort to gain new knowledge".

2.2 Research Methodology

It is the way of systematically solving the research problem. It is a science of studying
how research is conducted scientifically.

2.3 DATA COLLECTION

Data has been collected from secondary source.
Sources of Secondary data are:
1. Internet
2. Magazines
3. Newspapers

2
CHAPTER-3
LIMITATIONS OF THE STUDY
3.1 Limitations

• The time was also a limitation.

• Finance was also a limitation.
• The employees of the company were not supportive. They have not
provided me much information related to my project report.

3
CHAPTER-4

REVIEW OF LITERATURE

4.1 Literatures

Krishnamurthy in 2005 after inception of online trading in India in the year 2000 online
trading is gained momentum with trading volumes growing by 150 per cent per annum in
the years 2003-2005.The volume of all trades executed through the Internet on the
National Stock Exchange had grown from less than Rs 100 crore (Rs 1 billion) in June
2003 to over Rs 700 crore (Rs 7 billion) in July 2005 which was a handsome growth.

Anup Bagchi the MD and CEO of ICICIdirect.com as their company was the first player
to enter the online trading segment, ICICIdirect has made broking more structured and
transparent which further reduced the operational hassles.

At the same time, the number of subscribers trading through the portal of Kotak
Securities had gone up significantly by 150 per cent and the number of online trading
customers had grown from 30,000 to 75,000. Moreover, the company expected to have at
least 130,000 customers by the end of fiscal.

Online trading represented 30 per cent of Share khan's broking business in the year 2005.
The number of customers registered with Sharekhan was 130,000 at that point of time of
which 60,000 used Internet trading.

Mr. R. Kalyanaraman the senior vice-president of Sharekhan Ltd Sharekhan gets 60%
of its brokerage revenue from the online trading. In 2003 when there were only 10-15
brokers empanelled for Internet trading with the exchange and accounted just about 10%
of total volume in Indian stock markets the number has increased to around 300 brokers
wooing Internet- savvy investors. According to a recent study Ernst and Young only 4%
of India’s domestic household savings or just about 13% of its gross domestic product is
being channeled to shares and debentures issued by companies which is very less or in an
initial stage.

4
Sudip Bandyopadhyay chief executive of Reliance Money Ltd says that online investing
is still at a nascent stage in India and expects that Internet-based trading will eventually
take about half of the total stock market trading as like with developed markets such as
the US. Philippines has the highest online trade with about 55-60% execution of trade is
online. The reason is that they had wider Internet connectivity years before India. The
biggest challenge in India remains better Internet connectivity. The earlier Web-based
technology used for Internet trading has been replaced by specialized software which
gives real-time global data streaming rates to trader helping investors to analyze the
market trends and helps in faster execution of trades. Earlier the investors made trade
calls over the phone, which sometimes led to the delays.

Aseem Dhru, MD and CEO, HDFC Securities in today’s scenario an online business can
break even in as short a period as about 18-24 months. Earlier there were other problems
like the Internet connectivity was unreliable, and investors resisted the strict margins and
compliance online stock broking demanded. Initially it seemed that online stock trading
would flop.

Tarun Shah CEO OF Sharekhan the growth of Internet trading in the stock markets
would come with a rapid pace and web trading in the total turnover of the capital markets
would go up to 10 to 15 per cent in the next 2-3 years, which is now just about 1 to 2 per
cent.

5
CHAPTER-5

COMPANY PROFILE

5.1 Company Profile

Religare Enterprises Limited is Ranbaxy Laboratories Limited promoted financial

product and service Provider Company.

Religare provide its service in three different segments including Retail, Wealth
management and the Institutional spectrum. Company offers wide range of services
including equities, commodities, insurance broking, wealth advisory, portfolio
management services, personal finance services, Investment banking and institutional
broking services. Religare retail network has more than 900 locations in 300 cities and
towns in India.

Religare provides the online gateway to their investors so investor can trade online in
Equities, Commodities, apply for IPO's, invest in Mutual Funds, and buy Insurance.

Religare Securities Limited (RSL) is a subsidiary company of Religare Enterprises Ltd

and involve in equity related services include online trading at BSE and NSE,
Derivatives, commodities, IPO, Mutual fund, Investment banking and institutional
broking services.

People who wonder where Religare word came from, it is a Latin word meaning 'to bind
together'.

Vision of Religare

The vision is to build Religare as a globally trusted brand in the financial services domain
and present it as the “investment gateway of India ”. All employees of the organization
currently more than 10,000 in number ceaselessly strive to provide financial care driven
by the care value of diligence and transparency.

6
Mission

Providing financial care driven by the core values of diligence and transparency.

Brand Essence

Core brand essence is diligence and Religare is driven by the ethical and dynamic
processes of wealth creation.

VARIOUS COMPANIES UNDER THE FLAGSHIP OF RELIGARE

Insurance Distribution
Religare insurance broking limited, a 100% subsidiary of Religare enterprise is one of the
India’s leading insurance broking firm, with one of the retail networks in the country. The
company holds a composite broker’s license operating in life insurance, non life
Insurance and re insurance domains.

Commodity trading
Religare commodities limited, an effort of the Religare group was initiated to spearhead
Exchange based commodity trading. As a member of MCX, NCDEX & NMCE, RCL is a
trade facilitator providing the platform to trade and to cater TO THE NEED TO THE
Unique need of the exchange based commodity trading. Grounded in the Religare
philosophy, highly skilled and dedicated professionals strive to offer the client investment
solutions across the country. The company besides catering to the needs of the urban
commodities markets is also creating trading centers at local mandis
Equity Sector
Religare securities limited, a vibrant and growing subsidiary of Religare is a member of
national stock exchange, Bombay stock exchange, and depositary participant with both
NSDL & CDSL.
Here company provides personal attention to the clients and which is backed by the
strong analysis of the securities and recommendations and providing
1. Daily reports
2. Intra day trading calls

7
 3. Intra day derivatives calls

Personal Loan Services

It is to cater the financial needs of the individuals by advising them on various financial
Plans. Certified financial planners hired by Religare use their skills and knowledge base
for the active suggestions to the clients for the investments, tax benefits, insurance and
recommend stocks to buy or sell depending upon the short term and long-term financial
goals of the client.

Personal loans
Religare provides the loans to the clients depending up on the needs of the clients.
Following are the classes for which the loans are available.
1. Personal loan
2. Education loan
3. Health benefit loan
4. Vehicle loan

8
5.2 BOARD OF DIRECTORS

.No Name Designation

1 Mr.R K Shetty Alternate Director

2 Capt.G P S Bhalla Alternate Director

3 Mr.Sunil Godhwani Chairman and Managing director

4 Mr.Shachindra Nath Director & CEO

5 Mr.Anil Saxena Director & CFO

6 Dr.(Mrs.)Sunita Naidoo Independent Director

7 Mr.Stuart D Pearce Independent Director

8 Mr.J W Balani Independent Director

9 Mr.Padam Bahl Independent Director

10 Ms.Kathryn Matthews Independent Director

11 Mr.Deepak Ramchand Sabnani Independent Director

12 Mr.Harpal Singh Non Executive Director

CHAPTER -6

INTRODUCTION

9
6.1 Introduction

The erstwhile settlement system on Indian stock exchanges was also inefficient and
increased risk, due to the time that elapsed before trades were settled. The transfer was by
physical movement of papers. There had to be a physical delivery of securities -a process
fraught with delays and resultant risks. The second aspect of the settlement relates to
transfer of shares in favour of the purchaser by the company. The system of transfer of
ownership was grossly inefficient as every transfer involves physical movement of paper
securities to the issuer for registration, with the change of ownership being evidenced by
an endorsement on the security certificate. In many cases, the process of transfer would
take much longer than the two months stipulated in the Companies Act, and a significant
proportion of transactions would end up as bad delivery due to faulty compliance of
paper work. Theft, forgery, mutilation of certificates and other irregularities were
rampant. In addition, the issuer has the right to refuse the transfer of a security. All this
added to costs and delays in settlement, restricted liquidity and made investor grievance
redressal time consuming and, at times, intractable. To obviate these problems, the
Depositories Act, 1996 was passed. It provides for the establishment of depositories in
securities with the objective of ensuring free transferability of securities with speed,
accuracy and security. It does so by (a) making securities of public limited companies
freely transferable, subject to certain exceptions; (b) dematerialising the securities in the
depository mode; and (c) providing for maintenance of ownership records in a book entry
form. In order to streamline both the stages of settlement process, the Act envisages
transfer ownership of securities electronically by book entry without making the
securities move from person to person. The Act has made the securities of all public
limited companies freely transferable, restricting the company's right to use discretion in
effecting the transfer of securities, and the transfer deed and other procedural
requirements under the Companies Act have been dispensed with. Two depositories, viz.,
NSDL and CDSL, have come up to provide instantaneous electronic transfer of
securities.
In any stock exchange, trades or transactions have to be settled by either squaring up the
carrying forward positions or settling by payment of net cash or net delivery of securities.

10
This account settlement period, if it is long leads to several price distortions and allows
for market manipulation. It increases the chances of speculation resulting in volatility,
which hurts the small investors. With the application of IT in the securities market -
screen-based trading and trading through the Internet - it has been possible to reduce this
settlement period.

6.2 THE DEPOSITORIES ACT

The Depositories Act, 1996, ushered in an era of efficient capital market infrastructure,
improved investor protection, reduced risks and increased transparency of transactions in
the securities market. It also immensely benefited the issuer companies, in terms of
reduced costs and the effort expended in managing their shareholder populace. Perhaps,
no other single act other than the Depositories Act has had such profound all round
impact on every single stakeholder in the Indian capital markets. This legislation
envisaged multiple depositories in India to ensure benefits of competition for the users of
the depository system.

The Depositories Act which facilitated establishment of depositories (like CDSL) in India
sought to effectively curb irregularities in the capital market, and protect the interests of
the investors, and paved a way for an orderly conduct of the financial markets through
free transferability of securities with speed, accuracy, transparency etc. Due to the
introduction of the depository system, the investors are able to enjoy many benefits like
free and instant transferability in a secured manner at lower costs, free from the problems
like bad deliveries, odd-lots etc. Today the tradable lot is reduced to “one unit” hence
even a common man is able to invest money in one equity share or bond or debenture.
The investor is able to save a lot on account of stamp duty as government has exempted
stamp duty on transfer of securities at present. Investors are also spared from the
problems of preserving the securities held in physical form.

6.3 DEPOSITORY

The Depositories Act defines a depository as “a company formed and registered under
the Companies Act, 1956 and which has been granted a certificate of registration under

11
sub-section (1A) of section 12 of Securities and Exchange Board of India Act, 1992.”
The main function of a depository is to dematerialize securities and enable their
transactions in book-entry form.

As per The Bank for International Settlements (BIS), depository is “a facility for holding
securities which enables securities transactions to be processed by book entry. Physical
securities may be immobilized by the depository or securities may be dematerialized (so
that they exist only as electronic records)”.

In simple terms depository is an organization where securities of an investor are held in

electronic form.

A depository can be defined as an institution where the investors can keep their financial
assets such as equities, bonds, mutual fund units etc in the dematerialized form and
transactions could be effected on it. In India, there are two depositories namely, the

• National Securities Depository Limited(NSDL) promoted primarily by IDBI, the

Unit Trust of India and the National Stock Exchange, and the
• Central Depository promoted by the Stock Exchange, Mumbai.

Besides providing custodial facilities and dematerialization, depositories are offering

various transactional services to its clients to effect buying, selling, transfer of shares etc.
Through a system of paperless securities, depositories have made the going easier to
other institutions as well such as Stock Exchanges and its clearing houses, stock broking
firms, equity issuing companies, share transfer agents etc.

6.4 Similarities and differences between a bank and a depository

6.4.1. SIMILARITIES

12
A Bank
Promoted by persons and institutions of repute and
good standing.
Renders services like safe keeping of the money
(funds) of customers in book entry form.
Has an administrative Central Office and renders
services (like account opening), generally, through
branches.
Is required to verify the identity and address of the
customer before opening a bank account.
The bank is entitled to charge some fees for the
services like account maintenance, remittances,
safe custody etc.
Facilitates transfer of funds within the bank
(transfer) and also between two banking
institutions (through clearing).
Currency notes held in physical form are specific
and have distinctive identification features and
numbers. However, the funds (say, Indian Rupees
or U S Dollars) lying in a bank account are
fungible (i.e. exactly similar, inseparable and
without any identification number).
A bank needs express written consent of the
customer (like a cheque) for debiting his account.
Power of attorney holder can operate a bank
account.
A bank customer is entitled to get a statement of
account from the branch periodically.
Nomination facility is available in the bank
account.
13
A Depository (like CDSL)
Promoted by persons and institutions of repute and
good standing.
Renders services like safe keeping of securities
(shares, bonds, debentures etc.) of the customers in
book entry form.
Has an administrative Central Office and renders
services through Depository Participants (DPs) and
their branches.
Is required to verify the identity and address of the
investor before opening a demat account.
The depository is entitled to charge some fees for the
services like account maintenance, dematerialization,
pledging, transaction charges etc.
Facilitates transfer of ownership of securities within
the depository (transfer) and also between two
depositories.
Securities held in physical form are specific and have
distinctive identification features and numbers.
However, the securities (Equity Shares, bonds,
debentures, Government etc.) lying in a demat account
are fungible
A depository needs express written consent (Debit
Instruction Slip) of the account holder for debiting his
account.
A demat account can be operated by power of attorney
holder.
An account holder is entitled to get a statement of
demat account periodically from the DP.
Nomination facility is available in case of demat
accounts also.
6.4.2 DIFFERENCES

A Bank A Depository (like CDSL)

For opening a bank account, such as a A demat account can be opened by an

savings bank account, a minimum balance investor even without having/ owning any
has to be deposited along with the account securities i.e. with zero balance.
opening form.

14
 A customer having an account with a bank is An account holder of the depository is
called as an Account Holder. called as Beneficial Owner (of the
securities).

A bank is entitled to use funds lying in the A depository is not entitled to use the
savings or current deposit accounts of the securities lying in the demat accounts of
customers in the normal course of business the customers and hence does not pay any
and pays interest to them for the use. interest to them.

A bank account can be operated upon A demat account can be opened, operated
“jointly”, or, by “either or survivor” of the upon only by ALL the account holders
account holders or by “any one/two/three of", JOINTLY, at present.
the joint account holders.

In the bank account, addition or deletion of In the demat account, addition or deletion
name(s) of one or more of the account of name(s) of one or more of the account
holders is permitted. holders (beneficial owners) is NOT
permitted.

6.5 DEPOSITORY PARTICIPANTS

A Depository Participant is the registered agent of the depository concerned and it is

through the DP that an investor gets the services of a depository. To avail this service,
one has to open a Depository Account with the DP and shares for Dematerialisation have
to be surrendered after it have been duly transferred to his name.

Banks, financial institutions and stock brokers are acting as Depository Participants after
obtaining the required approval from SEBI and also complying with other statutory
requirements.

15
The DP account links the investor to the Depository which in turn has electronic links
with the Stock Exchanges, corporate and their Transfer agents etc as stated above. This
interface of the depository with various associates opens up many services to the investor
through the DP account such as payment or receipt of shares towards his transactions via
Stock Exchanges, receipt of bonus or right shares from the corporates in which he is a
shareholder, registering of share transfer, Dematerialisation (and many more.

CHAPTER 7
DEPOSITORY SYSTEM
7.1 Key features of depository system in India

7.1.1 Multi-Depository System: The depository model adopted in India provides for a
competitive multi depository System. There can be various entities providing depository
services. Dematerialization as against immobilization: The model adopted in India
provides only for dematerialization of securities. This is a significant step in the direction
of achieving a completely paper-free securities market. Many of the developed countries

16
have opted either for immobilization (E.g. Hong Kong) or both immobilization and
dematerialization (e.g. Japan) of securities.

Immobilization of securities is done by storing or lodging the physical security

certificates with an organization that acts as a custodian - a securities depository. All
subsequent transactions in such immobilized securities take place through book entries.
The actual owners have the right to withdraw the physical securities from the custodial
agent whenever required by them. In the case of IPO, a jumbo certificate is issued in the
name of the beneficiary owners based on which the depository gives credit to the account
of beneficiary owners.

Dematerialisation of securities occurs when securities issued in physical form are

destroyed and an equivalent number of securities are credited into the beneficiary owner's
account. India has adopted dematerialisation route to depository. In a depository system,
the investors stand to gain by way of efficient settlements, lower costs and lower risks of
theft or forgery, etc. But the implementation of the system has to be secure and well
Governed. All the players have to be conversant with the rules and regulations as well as
with the technology for processing. The intermediaries in this system have to play strictly
by the rules.

7.1.2 Fungibility - In the depository system, the securities dematerialised are not
identified by distinctive Numbers or certificate numbers as in the physical environment.
Thus all securities in the same class are identical and interchangeable. For example, all
equity shares in the class of fully paid up shares are interchangeable.
B
7.1.3 Registered Owner/ Beneficial Owner –
In the depository system, the ownership of securities dematerialised is bifurcated between
Registered Owner and Beneficial Owner. For the securities dematerialised, NSDL is the
Registered Owner in the books of the issuer; but ownership rights and liabilities rest with
Beneficial Owner. All the rights, duties and liabilities underlying the security are on the
beneficial owner of the security.

17
7.1.4 Free Transferability of shares:
Transfer of shares held in dematerialised form takes place freely through electronic book-
entry system.

7.2 Benefits of Depository System

• In the depository system, the ownership and transfer of securities takes place
by means of electronic book entries.
• Bad deliveries could be eliminated since shares are registered in the electronic
form that cannot be mutilated easily.
• Elimination of all risks associated with physical certificates
• Dealing in physical securities has associated security risks of theft of stocks,
mutilation of certificates, and loss of certificates during movements through
and from the registrars etc. Such problems do not arise in the depository
environment.
• No stamp duty for transfer of any kind of securities in the depository.
• This waiver extends to equity shares, debt instruments and units of mutual
funds etc in the depository. Thus, cost can be reduced.
• Immediate transfer and registration of securities In the depository
environment, once the securities are credited to the investors account on pay
out, he becomes the legal owner of the securities. There is no further need to
send it to the company's registrar for registration. Having purchased securities
in the physical environment, the investor has to send it to the company's
registrar so that the change of ownership can be registered and this usually
takes many months. So long as the shares are with the company or its agent
for transfer, the investor could not sell it in the market even the price is very
attractive and this increases his opportunity cost. To overcome this problem,
investors used to keep shares without effecting ownership transfer but this is
risky because they will not get their entitlements for dividend, bonus, rights

18
 etc, if any, and the share in question will become bad delivery if one book
closure is missed.
• Faster settlement cycle: The exclusive demat segments follow rolling
settlement cycle of T+2 i.e. the settlement of trades will be on the 5th working
day from the trade day. This will enable faster turnover of stock and more
liquidity with the investor.
• Faster disbursement of non-cash corporate benefits: NSDL provides for direct
credit of non-cash corporate entitlements like rights, bonus etc to an investor's
account, thereby ensuring faster disbursement and avoiding risk of loss of
certificates in transit.
• Low brokerage for trading in dematerialised securities Brokers provide this
benefit to investors as dealing in dematerialised securities reduces their back
office cost of handling paper and also
• Eliminates the risk of being the introducing broker: Elimination of problems
related to address Change, Transmission etc
• In case of change of address or transmission of demat shares, investors are
saved from undergoing the entire change procedure with each company or
registrar. Investors have to only inform their DP with all relevant documents
and the required changes are effected in the database of all the companies,
where the investor is a registered holder of securities.
• Elimination of problems related to selling securities on behalf of a minor. A
natural guardian is not required to take court approval for selling demats
securities on behalf of a minor.

7.3 Legal Framework

The operations of the depositories are primarily governed by the Depositories Act, 1996,
Securities and Exchange Board of India (Depositories & Participants) Regulations, 1996,
Bye-Laws approved by SEBI, and Business Rules framed in accordance with the
Regulations and Bye-Laws The Depositories Act passed by Parliament received the

19
President's assent on August10,1996. It was notified in a Gazette on August 12 of the
same year. The Act enables the setting up of multiple depositories in the country. This
was to see that there is competition in the service and there is more than one depository in
operation.
At present, two depositories are registered with SEBI –
The National Securities Depository Limited (NSDL)
Central Depository Services (India) Limited (CDSL).
Only a company registered under the Companies Act, 1956 and sponsored by the
specified category of institutions can set up a depository in India. Before commencing
operations, depositories should obtain a certificate of registration and a certificate of
commencement of business from SEBI.
As per the Act:
• Section 4: DP is an agent of the Depository:
A DP is an agent of the depository, who provides various services of the depository to
investors. The DP has to enter into an agreement with the depository to this effect. Any
investor who would like to avail the services of a depository has to enter into an
agreement with any DP of his choice. The DP will then make the depository services
available to the investor.
• Section 7: Free Transferability:
The securities held by an investor in the depository are freely transferable from one
beneficial owner to another.
• Section 8: Option to hold securities in demat form:
In the depository system, every investor subscribing to securities offered by an issuer has
an option to receive the same in physical form or dematerialised form. If an investor opts
for receiving the securities in dematerialised form, the issuer intimates the depository the
details of allotment of security. On receipt of this information, the depository enters the
name of the allottee as the beneficial owner of that security in its record.
• Section 9: Securities held in a depository are fungible:
All securities held by the depository are in dematerialised and fungible form.
• Section 10: Registered Owner and Beneficial Owner:

20
The depository is deemed the registered owner for effecting transfer of ownership of
security on behalf of a beneficial owner. But as a registered owner, it does not have any
voting rights or any other rights in respect of those securities. The beneficial owner is
entitled to all rights and benefits as well as subject to all liabilities in respect of his
securities held in the depository.
• Section 14: Option to opt out of depository:
A beneficial owner may opt out of a depository in Respect of any security by requisite
intimation to the depository.
• Section 16: Depository to indemnify losses:
A depository shall indemnify a beneficial owner, any loss caused due to negligence of the
depository or its participant.

7.4 Records to be maintained by Depository

Every depository is required to maintain the following records and documents. These
have to be preserved for a minimum period of five years.

• Records of securities dematerialised and rematerialised.

• The names of the transferor, transferee, and the dates of transfer of securities.
• A register and an index of beneficial owners.
• Details of the holdings of the securities of beneficial owners as at the end of each
day.
• Records of instructions received from, and sent to, participants, issuers, issuers'
agents and beneficial owners.
• Records of approval, notice, entry and cancellation of pledge or hypothecation.
• Details of participants.
• Details of securities declared to be eligible for dematerialisation in the depository.
• Such other records as may be specified by SEBI for carrying on the activities as a
depository.

21
7.5 Services of Depository

A depository established under the Depositories Act can provide any service connected
with recording of allotment of securities or transfer of ownership of securities in the
record of a depository. Any person willing to avail the services of the depository can do
so by entering into an agreement with the depository through any of its participants. A
depository can provide depository services only through a DP. A depository cannot
directly open accounts and provide services to clients. Every depository in its Bye-Laws
must state which securities are eligible for demat holding. Generally, the following
securities are eligible for dematerialisation:
(a) Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other body corporate
(b) Units of mutual funds, rights under collective investment schemes and venture capital
Funds, commercial paper, certificates of deposit, securitized debt, money market
Instruments, government securities, and unlisted security

7.6 Functions of depositories:

7.6.1 Dematerialisation:
One of the primary functions of depository is to eliminate or minimize the Movement
of physical securities in the market. This is achieved through dematerialisation of
securities. Dematerialisation is the process of converting securities held in physical
form into holdings in book entry form.

7.6.2 Account Transfer

The depository gives effects to all transfers resulting from the settlement of Trades
and other transactions between various beneficial owners by recording entries in the
accounts of such beneficial BOs

22
 7.6.3 Transfer and Registration:
A transfer is the legal change of ownership of a security in the records of the issuer.
For affecting a transfer, certain legal steps have to be taken like Endorsement,
execution of a transfer instrument and payment of stamp duty. The depository
accelerates the transfer process by registering the ownership of shares in the name of
the depository. Under a depository system, transfer of security occurs merely by
passing book entries in the records of the depositories, on the instructions of the
beneficial owners.
7.6.4 Corporate Actions:
A depository may handle corporate actions in two ways. In the first case, it merely
provides information to the issuer about the persons entitled to receive corporate
benefits. In the other case, depository itself takes the responsibility of distribution of
corporate benefits.
7.6.5 Pledge and Hypothecation:
The securities held with NSDL may be used as collateral to secure Loans and other
credits by the clients. In a manual environment, borrowers are required to deliver
pledged securities in physical form to the lender or its custodian. These securities are
verified for authenticity and often need to be transferred in the name of lender. This
has a time and money cost by way of transfer fees or stamp duty. If the borrower
wants to substitute the pledged securities, these steps have to be repeated. Use of
depository services for pledging/ hypothecating the securities makes the process very
simple and cost effective. The securities pledged/hypothecated are transferred to a
segregated or collateral account through book entries in the records of the depository.

7.6.6 Linkages with Clearing System:

Whether it is a separate clearing corporation attached to a stock exchange or a
clearinghouse (department) of a stock exchange, the clearing system performs the
functions of ascertaining the pay-in (sell) or pay-out (buy) of brokers who have traded

23
 on the stock exchange. Actual delivery of securities to the clearing system from the
selling brokers and delivery of securities from the clearing system to the buying
broker is done by the depository. To achieve this, depositories and the clearing
system should be electronically linked. Having understood the depository system, let
us now look at the organization and functions of National Securities Depository
Limited(NSDL).

24
CHAPTER 8
ONLINE TRADING
8.1 What is online trading?

Online trading involves investment activity that takes place over the Internet and it does
not require physical inclusion of the broker. An investor has to register with an online
trading portal like ICICIdirect.com, motilaloswal.com and sharekhan.com and many
companies like that and investor gets into an agreement with the firm to trade in different
securities according to the terms and conditions given on the agreement. As the servers of
the online trading portal are connected all the time to the stock exchanges and designated
banks, the order processing is done in real time and investors can have updates on the
trading. They can also check the status of their orders either through e-mail or through the
interface that it cannot be accessed by a third party. Some options are usually given to
users such as to link their bank account, Demat accounts and brokerage accounts into a
single interface. A single window is also there for all exchanges and a single screen is
there for the complete order routing mechanism. The hardware used comprises Web and
application servers, switches, routers, firewalls and security devices, and specialized
appliances. There are two broad models in play in the online brokerage space-

1. Bank-backed firms
2. Entrepreneur-floated firms.

Bank-backed brokerages such as ICICI direct and HDFC Securities have expanded on
the basis of their brand name and the trust of investors in them. The integrated 3-in-1
accounts offered by these bank-backed brokerages help their parent bank by giving it
accounts along with float income.

Entrepreneur-backed companies like Sharekhan, Indiabulls, Religare and Indiainfoline

have expanded by offering customers a mix of online and offline accounts, higher margin
finance amounts and lower brokerage rates. Though the bank based has performed better
but the latter have not lagged too far behind.

25
The reason why online trading has developed over conventional offline brokerage firms
is that this conventional method struggled with unfavorable economies. Staff cost is just
one example of it. As the markets opens for 330 minutes a day one dealer can at best
execute 500 trades in a day while online company like ICICI direct executes 150,000-
200,000 trades a day on the National Stock Exchange alone accounting for 3-4% of NSE
trades of 5 million a day. It would require a large amount of dealers to service this
demand. Besides the salary costs it would also demand huge expenses in real estate and
support systems.

The offline model has a downfall in the form of lower bandwidth, IT costs, and the cost
of bandwidth has fallen to one-eighth of what it was in 2000 giving online broking an
advantage especially in the case of lower-volume retail investors.

Today 30% of volumes on the NSE come from this and it may go up to 50% in three-four
years providing explosive growth for online broking in India.

To be a successful trading portal it will definitely depend on bouquet of services provided

by it for an end-user. Most of the portals charge a small registration fee and brokerage
based on various conditions but it is important for the organization to keep focused on
customer-centric services and delivery models to actually enjoy the most attention.

8.2 Advantages of online trading

8.2.1 Provides with the Freedom of Information

• The Internet provides a new sense of controlling our financial future as the
amount of investment information available online is truly outstanding. An
investor can-Know the price of any stock he desires at any point time on the
internet.
• An investor can review the price history of any stock in chart format online.

26
 • Helps an investor in receiving a wealth of free commentary and analysis about
stock markets in the global economy.
• Helps an investor to conduct an extensive financial research of any company he
desires.
• He may also consult with other investors online present around the world Some
online stock broking companies provide real-time stock quotes, daily roundups
of the stock market, expert commentary, and a deep community of fellow
investors.
8.2.2 Provides Control to Investors Money
When an investor wants to buy or sell stock he no longer need to call his broker on the
phone thus helping in the execution of the order instantly on the internet.
8.2.3 Provides access to the market through the sophisticated information streams,
dedicated trading platforms and sophisticated tools the investor can access the markets,
which provide more agility in buying and selling stocks.
8.2.4 Ensures the best price for investors
Some companies like Investsmart (IL&FS) specialize in the techniques, which offers the
best price deals for the buy and sell orders of the investors and traders providing the high
level of transparency by displaying of information relating to the specific stocks and
company profiles, which helps in getting the best quote for the orders.
8.2.5 Online trading offers greater transparency
Online trading offers the investors with greater transparency by providing with an audit
trail. The process involves a complete integrated electronic chain starting from order
placement, to clearing and settlement and finally ending with a credit into the depository
account of the investor. All these stages are inspected which brings the transparency into
the system.
8.2.6 Provides hassle free trading
Online trading provides an integration of the bank account, trading account and demats
accounts, which leads to easy and paperless trading for the client.

27
8.2.7 Online trading allows instant trade execution
Online transactions helps in the quick execution of the entire trading transaction right
from logging to the traders site and to the settlement of the bank account in a very short
period of time.
8.2.8 It provides a level playing field
Trading online gives even the smallest retail investor access to information, which was
earlier available only to the big traders. It has provided with a level playing field for all
investors in the securities market.
8.2.9 Online trading reduces the settlement risk
This method of trading reduces the settlement risk for the investor as when a short sell
order is played the orders are squared off at the specified cut-off time and are not allowed
to be carried forward.
8.2.10 Provides live financial news & analysis
The online sites also provide live terminals, which provide streaming news to give
investor the latest financial information as it occurs.
8.2.11 Online help desk
Some companies provide online help desk an investor cancan contact the Tele Trading
Executives from the Tele Trading team during and after market hours and can clarify
questions.
8.2.12 Instant order trade confirmations
Through online trading every trade is confirmed immediately and investor receives an on-
screen confirmation following every trade with full details for the investors records which
avoids costly errors that would have been discovered when it is too late.
8.2.13 Keeps Information Secure
As per the guideline provided by SEBI every effort has to be made to keep the investors
account and personal information secure by use of encryption technology and updated
security technology to advanced fraud prevention measures.

28
8.3 Disadvantages of online trading

1. In online terminal, investor can’t get customized expert advice, whereas in offline the
broker gives suggestions according to investors strategy (i.e. short term or long-term)
2. Brokerage is high compared to offline.
3. Privacy is less due to hacking scandals
4 .Transactional errors due to technical problems

29
CHAPTER 9
NATIONAL SECURITIES DEPOSITORY LIMITED
9.1 Introduction to NSDL
National Securities Depository Limited is the first depository to be set-up in India The
Industrial Development Bank of India (IDBI) - the largest development bank in India,
Unit Trust of India (UTI) - the largest Indian mutual fund and the National Stock
Exchange (NSE) - the largest stock exchange in India, sponsored the setting up of NSDL
and subscribed to the initial capital. NSDL commenced operations on November 8, 1996.

The following organizations are shareholders of NSDL as on December 31, 2009:

1. Industrial Development Bank of India
2. Unit Trust of India
3. National Stock Exchange of India Limited
4. State Bank of India
5. Oriental Bank of Commerce
6. Citibank N.A.
7. Standard Chartered Bank
8. HDFC Bank Limited
9. The Hong Kong and Shanghai Banking Corporation Limited
10. Deutsche Bank A.G.
11. Dena Bank
12. Canara Bank
13. Union Bank of India

9.2 Management of NSDL

NSDL is a public limited company managed by a professional Board of Directors. The
day-today operations are conducted by the Managing Director and CEO. To assist theMD
and CEO in his functions, the Board appoints an Executive Committee (EC) of not more
than 15 members.

30
Board of Directors

Dr. R. H. Patil
1 Chairman Chairman
The Clearing Corporation of India Limited
Mr. Gagan Rai Managing Director &
2
National Securities Depository Limited CEO
Mr. Ravi Narain
3 Managing Director Director
National Stock Exchange of India Limited
Mr. Justice B.N. Srikrishna (Retd.)
4 Former Judge Director
Supreme Court of India
Mr. P. P. Vora
5 Former Chairman & Managing Director Director
Industrial Development Bank of India Limited
Mr. Bansi S Mehta
6 Chartered Accountant, Senior Partner Director
M/s Bansi S. Mehta & Co.
Mr. Sudesh Punhani
7 Former Director (Finance) Director
National Aviation Company of India Limited
Mr. Rajiv B. Lall
Managing Director & CEO
8 Director
Infrastructure Development Finance Company
Limited
Dr. Prakash G Apte
9 Former Director Director
Indian Institute of Management, Bangalore
Mr. R.K. Bansal
10 Executive Director Director
IDBI Bank Limited
Mr. Ashok Mukand
11 Former Deputy Managing Director & CFO Director
State Bank of India
Mr. Kaushik Shaparia
Managing Director
12 Director
Global Transaction Banking Head, India
Deutsche Bank
9.3 NSDL Facts and Figures as on July 31, 2010

31
Number of certificates eliminated (approx.) 770

Number of companies in which more than 2760

75%shares are dematted
Average number of accounts opened per 3672
day since Nov 1996
Presence of demat account holder in the 83% of all pin codes in the country
country

9.4 Vital Statistics

NSDL

Companies Linked 474

That are compulsory demat trading list (104 104
scripts)
That are in Nifty (50 scrips) 50
That are in Sensex (30 scrips) 30

That are in Junior Nifty (50 scrips) 50

Number of DP's 103

DP's branches & service centre 1,025

Stock exchange connected 10*

*NSE,BSE, OTCEI, ISE, Bangalore, delhi. Calcutta, ludhiana, chennai and

Ahmedabad

9.5 Functions of NSDL

32
 • enables the surrender and withdrawal of securities to and from the depository
• (Dematerialisation and Rematerialisation).
• Maintains investor holdings in the electronic form.
• Effects settlement of securities traded on the exchanges.
• Carries out settlement of trades not done on the stock exchange (off-market
trades).
• Transfer of securities.
• Pledging/hypothecation of dematerialised securities.
• Electronic credit in public offerings of companies or corporate actions.
• Receipt of non-cash corporate benefits like bonus rights, etc. in electronic
form

9.6 Services Offered by NSDL

• NSDL offers a host of services to the investors through its network of DPs:
• Maintenance of beneficiary holdings through DPs
• Dematerialisation
• Off-market Trades
• Settlement in dematerialised securities
• Receipt of allotment in the dematerialised form
• Distribution of corporate benefits
• Rematerialisation
• Pledging and hypothecation facilities
• Freezing/locking of investor's account

9.7 Role in E-Trading

33
Securities Position Easy Electronic Dissemination-e (SPEED-e)
In order to extend the benefits of technological progress to investors, NSDL has launched
SPEED-e services. SPEED-e is a internet based facility for clients of Depository
Participants (DPs) that enables the accountholders to submit instructions to their DPs
through SPEED-e website on internet. The clients can submit instructions at a time
convenient to them from a place convenient to them using SPEED-e website of NSDL.
The accountholders can also view the status of their instructions submitted through
SPEED-e on the website itself. SPEED-e is expected to greatly reduce the time and
efforts required in processing the instructions.

Submission of Instruction through Mobile Phone Login Easily (SIMPLE)

NSDL launched SIMPLE (Submission of Instruction through Mobile Phone Login
Easily), a facility that will enable the password based users of SPEED-e facility to submit
instructions on SPEED-e website through their mobile phones.
Salient features of SIMPLE are as follows:
• This facility will be available for password based users (hereinafter referred as
Users) of SPEED-e facility.
• Users will be able to submit Client to Clearing Member Pool Account transfer
instructions on SPEED-e website through their mobile phones.
• Mobile phones of the Users should be enabled with GPRS facility for
accessing SPEED-e website.

Submission of Power of attorney based Instructions for Clients Electronically

(SPICE)
NSDL has introduced of a facility for auto pay-in of securities named SPICE
(Submission of Power of attorney based Instructions for Clients Electronically) using the
infrastructure of SPEED-e and IDeAS. The details of the facility are given below:
This facility is in respect of demat accounts operated on the basis of Power of Attorney
(POA). Many investors execute POA in favour of their stock brokers (i.e. Clearing
Members). Based on the POA, Clearing Members (CMs) submit instructions (auto pay-
in) to the Participants (where Clients maintain demat accounts) to debit the demat

34
accounts of the Clients. SPICE would enable such CMs to submit digitally signed
instructions to Participant through the SPEED-e facility thereby eliminating the need to
give paper based delivery instructions to the Participants.

Internet-based Demat Account Statement (IDeAS)

NSDL launched its first Internet-based initiative, SPEED (Securities Position Easy
Electronic Dissemination), in February 2000 now called IDeAS (Internet-based Demat
Account Statement). This facility is available on SPEED-e website for viewing balances
and transactions in demat accounts. It is available to the users of SPEED-e, Clearing
Members who have subscribed to IDeAS and to those clients whose Participants are
registered for IDeAS. The information (balances and transactions) is updated on an
online basis with a delay of maximum 30 minutes.

Securities Trading Information Easy Access and Delivery (STEADY)

Using the infrastructure of SPEED-e, NSDL has developed its third Internet-based
application, STEADY (Securities Trading Information Easy Access and Delivery), which
is a means of transmission of trade information electronically across market participants.
STEADY will enable electronic communication between brokers, custodians and fund
managers in respect of Custodian trades. In order to use the STEADY facility, brokers,
custodians and fund managers will have to access STEADY website on Internet with
smart card, bearing digital signature certificate issued by licensed Certifying Authority
(CA), approved by NSDL. Further all batches and uploads from brokers / custodians /
fund managers will be digitally signed by the respective users and will be accepted by
STEADY only after successful verification of digital signature. Also all downloads
obtained by brokers / custodians / fund managers will bear the digital signature of
STEADY site.

CHAPTER -10
CENTRAL DEPOSITORY SERVICES (INDIA) LIMITED

35
10.1 Introduction to CDSL

A Depository facilitates holding of securities in the electronic form and enables securities
transactions to be processed by book entry by a Depository Participant (DP), who as an
agent of the depository, offers depository services to investors. According to SEBI
guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act
as DPs. The investor who is known as beneficial owner (BO) has to open a demat
account through any DP for dematerialisation of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be
obtained through the DP. The DP is required to provide the investor, at regular intervals,
a statement of account which gives the details of the securities holdings and transactions.
The depository system has effectively eliminated paper-based certificates which were
prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient
and instantaneous transfer of securities.

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading
banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard
Chartered Bank, Union Bank of India and Centurion Bank.

CDSL was set up with the objective of providing convenient, dependable and secure
depository services at affordable cost to all market participants. Some of the important
milestones of CDSL system are:

• CDSL received the certificate of commencement of business from SEBI in

February 1999.
• Honorable Union Finance Minister, Shri Yashwant Sinha flagged off the
operations of CDSL on July 15, 1999.
• Settlement of trades in the demat mode through BOI Shareholding Limited,
the clearinghouse of BSE, started in July 1999.
• All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have
established connectivity with CDSL.

36
 • As at the end of Dec 2007, over 5000 issuers have admitted their securities
(equities, bonds, debentures, and commercial papers), units of mutual funds,
certificate of deposits etc. into the CDSL system.

10.2 Vital Statistics

Companies Linked CDSL

That are compulsory demat trading list (104 81

scripts)
39
That are in Nifty (50 scrips)

That are in Sensex (30 scrips) 23

That are in Junior Nifty (50 scrips) 14

Number of DP's 18

DP's branches & service centre 31

Stock exchange connected 1**

**BSE

10.3 Shareholders of CDSL

37
CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with
Bank of India, Bank of Baroda, and State Bank of India and HDFC Bank.The initial
capital of the company is Rs.104.50 crores. The list of shareholders with effect from 5
July, 2010 is as under

Sr. Name of shareholders Value of % terms

No. holding (in to total
Rupees Lacs) equity

1 Bombay Stock Exchange Limited 5,663.46 54.20

2 Bank of India 582.00 5.57

3 Bank of Baroda 530.00 5.07
4 State Bank of India 1,000.00 9.57
5 HDFC Bank Limited 750.00 7.18
6 Standard Chartered Bank 750.00 7.18
7 Canara Bank 674.46 6.45
8 Union Bank of India 200.00 1.91
9 Bank of Maharashtra 200.00 1.91
10 The Calcutta Stock Exchange 100.00 0.96
Limited
11 Others 0.08 0.00
TOTAL 10,450.00 100.00

10.4 Board of Directors

A professional Board of Directors with vast and varied experience in capital markets and
banking is at the helm of affairs at CDSL.

38
 Mr. S S Thakur Chairman

Mr. V V Raut Managing Director and Chief

Executive Officer
Mr. P S Reddy Executive Director

Mr. M. R. Mayya Independent Director

Mr. Madhu Kannan Sponsor Director – Bombay

Stock Exchange Limited
Mr. L. P. Aggarwal Sponsor Director – Bombay
Stock Exchange Limited
Mr. Prakash R. Kacholia Sponsor Director – Bombay
Stock Exchange Limited
Mr. Ashishkumar Chauhan Sponsor Director – Bombay
Stock Exchange Limited
Mr. Anjan Barua Sponsor Director - State
Bank of India
Mr. A. D. M. Chavali Sponsor Director - Bank of
Baroda

10.5 Management team

39
Mr. V V Raut Managing Director and
Chief Executive Officer
Mr. P S Reddy Executive Director

Mr. Pramod Deshpande Chief Technology Officer

Mr. Cyrus Khambata Sr.Vice President. Business

Development(Currently on
deputation to CDSL
Ventures Ltd. as CEO with
effect from 7-12-2006)
Mr. Jitendra Chad Vice President.
Information Technology
Ms. Nayana Ovalekar Vice President.Audit,
Inspection & Compliance
Mr. Bharat Sheth Vice President.
Accounts & Administration
Mr. Sunil Alvares Vice President.
Business Development
Mr. Ramkumar K. Vice President.Operations

Mr. Jignesh Gandhi Vice President.New Projects

Mr. Satish Budhakar Vice President.

Legal & Company
Secretary

10.6 Why a Demat Account with CDSL?

10.6.1 Convenience:

• Wide DP Network: CDSL has a wide network of DPs, operating from over 6000
sites, across the country, offering convenience for an investor to select a DP based
on his location.

40
 • On-line DP Services: The DPs are directly connected to CDSL thereby providing
on-line and efficient depository service to investors.
• Wide Spectrum of Securities Available for Demat: The equity shares of almost
all A, B1 & B2 group companies are available for dematerialisation on CDSL,
consisting of Public (listed & unlisted) Limited and Private Limited companies.
These securities include equities, bonds, units of mutual funds, Govt. securities,
Commercial papers, Certificate of deposits; etc. Thus, an investor can hold almost
all his securities in one account with CDSL. A BO can also hold warehouse
receipts pertaining to commodities, in a demat account. However, a separate
account should be opened for holding warehouse receipts
• Competitive Fees Structure: CDSL has kept its tariffs very competitive to
provide affordable depository services to investors.
• Internet Access: A DP, which registers itself with CDSL for Internet access, can
in turn provide demat account holders with access to their account on the Internet

10.6.2 Dependability:
• On-line Information to Users: CDSL's system is built on a centralized database
architecture and thus enables DPs to provide on-line depository services with the
latest status of the investor's account.
• Convenient to DPs: The entire database of investors is stored centrally at CDSL.
If there is any system-related issues at DPs end, the investor is not affected, as the
entire data is available at CDSL
• Contingency Arrangements: CDSL has made provisions for contingency
terminals, which enables a DP to update transactions, in case of any system
related problems at the DP's office.
• Meeting User's Requirements: Continuous updation of procedures and
processes in tune with evolving market practices is another hallmark of CDSL's
services
• Audit and Inspection: CDSL conducts regular audit of its DPs to ensure
compliance of operational and regulatory requirements.

41
 • Dormant Account Monitoring: CDSL has in place a mechanism for monitoring
dormant accounts.
• Helpdesk: DPs and investors can obtain clarifications and guidance from CDSL's
prompt and courteous helpline facility.

10.6.3 Security
• Computer Systems: All data held at CDSL and is automatically mirrored at the
Disaster Recovery site and is also backed up and stored in fireproof cabinets at the
main and disaster recovery site.
• Unique BO Account Number: Every BO in CDSL is allotted a unique account
number, which prevents any erroneous entry or transfer of securities. If the
transferor's account number is wrongly entered, the transaction will not go
through the CDSL system, unless corrected
• Data Security: All data and communications between CDSL and its users is
encrypted to ensure its security and integrity.
• Claims on DP: If any DP of CDSL goes into liquidation, the creditors of the DP
will have no access to the holdings of the BO.
• Insurance Cover: CDSL has an insurance cover in the unlikely event of loss to a
BO due to the negligence of CDSL or its DPs

10.7 Services

The Depository Participant (DP) is the link between the shareholder, the company and
CDSL and provides the following services:

10.7.1 Account opening

To utilize the services offered by a depository, any person having investment in any
security or intending to invest in securities needs to have a demat account with a CDSL-

42
DP. This holder of such demat account is called as "Beneficial Owner (BO)". A BO can
maintain a demat account with zero balance in such account. A BO can open more than
one account with the same or multiple DPs, in the same name/s and order, if he/she
desires so. The investor can approach any DP/s of his/her choice to open a demat
account.

10.7.2 Dematerialisation
Dematerialisation is a process by which physical certificates (of shares / debentures /
other securities) are converted into electronic balances. A BO has to submit the request
for dematerialisation by submitting the demat request form (DRF) duly completed along
with the concerned physical certificates, to his/her DP.

10.7.3 Processing Delivery & Receipt Instructions

To settle trades done on a stock exchange (on-market trades) and trades, which
are directly settled between two BOs (off-market trades), BOs submit duly
completed delivery instructions in the prescribed form to DP. For receipt of
securities into his/her account, a BO can give one time "standing instruction" to
DP. Once such a standing instruction is given to the DP, there is no need to
submit separate instructions for receipt every time the investor buys securities.
10.7.4 Account Statement
Generally a DP sends to the BO, a statement of his account, monthly, if there is
any transaction in the account or every quarter if the account is not operated
during that period.
10.7.5 Rematerialisation
Rematerialisation is the process by which the electronic balances held in the
demat account can be converted back into physical certificates.
10.7.6 Pledging
If the BO decides to pledge any securities in his BO account, he can avail of the
same by submitting the pledge creation form duly completed, to his DP.

10.7.7 Nomination
BO accounts also has a facility for nomination in favor of any person.

43
10.7.8 Transmission of securities
CDSL offers a facility for transmission of balances held in BO account/s (to other
BO account/s) if so required due to death, lunacy, bankruptcy, insolvency or
required due to operation of any law.
10.7.9 Change in Address
A BO who wishes to register his change in address submits his/her request in
writing to his/her DP. The changes entered by the DP in the CDSL system will be
automatically downloaded to all the companies in which the BO is holding
securities. This facility offered by CDSL saves money, time and effort for the BO.
10.7.10 Bank Account Details
SEBI has made it mandatory for companies to print details of bank account of the
BO on dividend/interest warrants etc. to prevent possibilities of misuse of the
warrants. All BOs should submit a request in writing to the DP if they wish to
record / change their bank account details.

44
10.8 Cutting-Edge Technology

CDSL has installed state-of-the-art hardware and software to ensure the security and
integrity of the data. The hardware has been procured from Hewlett Packard – high-end
servers with Cell Board architecture, employing HP’s super dome technology and is
connected to near fault tolerant storage from EMC² Corporation featuring multiple RAID
levels and intelligent diagnostics (automatic disk fault finding system). This is arguably
the world’s best storage system and the first of its kind to be installed in India.

Users have various options to establish connectivity with the CDSL system, using a
VSAT, Leased Telephone Line or Ethernet network. Users also have the facility of a
backup by opting for Integrated Subscriber Data Network (ISDN) telephone connection
(similar to the one they use at their homes) to ensure 100 % uptime.

Centralized database
CDSL’s software ‘Central Depository Accounting System’, (CDAS), has been
developed, customized and supported by CMC Ltd. CDAS system is equipped with
centralized database architecture. This implies that CDSL centrally performs the major
activities such as processing, storing and maintenance of data and its backup, not only at
CDSL’s main site of operations, but also at the Disaster Recovery Site (DRS) situated at
a remote location. This develops a safety net such that the users may devote their entire
concentration in business.

Transactions of any user, irrespective of the location, are updated the moment they are
committed into the system, ensuring that there are no ‘in-transit’ positions between
CDSL’s records and those of the users. Credits of securities arising from demat
confirmations; corporate actions and transfers are available instantaneously, which makes
such securities ready for further use. An allotment of securities in a Rights issue, for
instance, can be effected during the business day and the allottees can use these securities
instantaneously. At CDSL, things happen on real time basis.

45
Wide network of online depository participants

With the introduction of shorter settlement cycles, the significance of live connectivity
for DP branches assumes greater importance for enabling settlement of trades within the
stipulated time. CDSL has made it possible for the DPs to provide full range of
depository services online from their branches without having to make substantial
investment in hardware and software. CDSL system facilitates the main DP to monitor
and control functioning of its branches. A DP of CDSL can, therefore, provide online
depository services to BOs at their doorstep.

• The easi access

“Electronic Access to Securities Information” (easi) is the internet facility for CDSL DPs,
BOs and Clearing Members (CMs) to have anywhere access, 24 hours a day, seven days
a week, to get information about their demat accounts through CDSL’s dedicated
website.
Apart from providing almost real time information of their holdings in their demat
accounts, easi also provides the status of instructions, details of past transactions and
enables users to take a printout of their statement of account. easi also offers a useful
facility of daily valuation of the stocks held in a demat account and aggregate value of the
portfolio. Through easi, one can also obtain the closing rates of stocks held in an account
as of the close of business on the previous day at BSE.
• easiest -
In order to facilitate a CDSL demat account holder to easily adapt to the fast reducing
settlement cycle, CDSL has introduced “Electronic Access to Securities Information and
Execution of Secured Transactions ” easiest, its Internet-enabled services to empower a
demat account holder in managing his securities ‘anytime-anywhere’ in an efficient and
convenient manner, all in a state-of-the-art secure environment.
easiest is an Internet facility which permits BOs/CMs to submit debit/credit transaction
instructions to effect off-market, on-market, inter-depository and early pay-in
transactions.

46
A BO/CM who has entered instructions through easiest need not give a separate debit
instruction slip/s to his DP. Moreover, all the facilities and benefits of easi are
automatically available to a subscriber of easiest.

There are two options available on easiest:

A. Trusted account

• Trusted accounts are settlement accounts of your CM. A BO can specify

up to 4 such CM settlement accounts•

• Transfer of securities through on-market or off-market will be permitted

only to these specified CMs.

• Setting up of transactions through trusted account option will be permitted

by additional password (PIN), which will be mailed separately.

• Under the trusted account option only ‘off-market’, ‘on-market’ and ‘early
pay-in’ transfers will be permitted.

B. Account of choice - Transfers

• In the account of choice option, transfer of securities will be permitted to any

demat account using a digital signature stored on e-token (device provided by
CDSL at an additional cost, which stores the digital signature).

• CMs will have account of choice option only and must procure e-token for
authenticating transactions.

Thus, CDSL’s easiest facility gives you anytime-anywhere convenience to operate your
demat account and keep you updated about your demat account status, in bare detail, at a
time and place that you choose to access the information

• SMART
As a risk management initiative, CDSL has launched SMS Alert service. Under this
service, a BO has to register by providing mobile number of the first / sole holder. CDSL
will provide SMS on this number when a debit takes place in the BO account, SMS will
also be provided for any credits to the account due to corporate action or IPO.

47
Safety and Security
CDSL has established a world-class secure and robust accounting and transaction
management system, which accurately processes over one hundred thousand transactions
daily. An additional server is on standby at CDSL’s main site of operations to meet any
contingencies, thereby, ensuring uninterrupted accessibility of the CDSL system to all
users.
The data is continually auto mirrored on the EMC² storage system at the main site to
ensure adequate backup and protection of data. Data backup on high capacity ‘Ultrium’
device is taken daily and stored at a remote site safely. Moreover, CDSL’s, seamlessly
operational state-of-the-art, disaster recovery site ensures that data is also simultaneously
updated at a remote site.
The data and messages communicated between CDSL and its users are encrypted in
transmission to protect the interests of all users. CDSL does not provide dial-up access
and only authorized users can access CDSL system. In other words, only a person at DP
end who has been pre-authorized by CDSL can access the CDSL system. Each BO in the
CDSL system is allocated a unique BO account number known as BO-ID.

Efficient settlements

With the ever-evolving market practices, CDSL provides Clearing Members (CM) with
tailored solutions to meet their specific requirements, which require multiple methods for
pay-in of securities to enhance their operational efficiency. CDSL provides facilities to
CMs to opt for any of the pay-in options like early pay-in, normal pay-in, auto pay-in and
BO-level pay-in, based on their convenience.

CMs/BOs can deliver securities directly to the Clearing Corporation (CC) / Clearing
House (CH) immediately after trade (early pay-in) or deliver the securities at the pay-in
time (normal pay-in). CDSL system also has a facility for part deliveries, just in case the
available balance is insufficient to meet the pay-in obligation in full.

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CDSL system enables CMs to carry out auto pay-in for their pay-in based on data
received from the CC/CH, without any additional effort from the CMs or their DPs. A
comprehensive ‘settlement report’ assists the CM to find out which client has given
instructions and whether the balance in his account is sufficient to fulfill the pay-in
obligations (shortages, if any, are also shown). Once pay-in is complete, the total pay-in
and shortage quantity, if any, for each delivery instruction are made available to the CM
through a simple ‘single‘report.

On-Line Inter-Depository Transfers (OLIDT)

The OLIDT facility launched in India with effect from December 14, 2002 connecting
CDSL with the other depository on-line is one of its kind in the world. It enables
instantaneous transfer of securities between accounts held with different depositories as
per the convenience of investors, CMs and DPs, any time during the specified business
hours. The OLIDT facility has increased the user's options to utilize securities received in
payouts for subsequent transactions, particularly, for pay-in. The securities received in
the CDSL account would be immediately available to meet the pay-in obligations, using
the multiple convenient pay-in options available in the CDSL system.

Availability of wide spectrum of securities

The equity shares of almost all companies listed on all the Stock Exchanges of India are
available for dematerialization on CDSL. Practically all categories of securities such as
bonds, debentures, commercial papers, government securities, units of mutual funds and
exchange traded funds, certificates of deposit, pass-through-certificates etc. are available
for demat on CDSL.

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Prompt and courteous helpdesk
At CDSL, convenience comes in many forms - one of which is CDSL’s ever-dependable
prompt and courteous help line facility. This facility enables DPs, issuers and CMs to
obtain any assistance, clarification or guidance and for speedy redressal of any issues.

Ensuring customer satisfaction

CDSL is continually developing ways to automate and enhance processing efficiencies
for the benefit of DPs, CMs, issuers and BOs. The user-centric business model finds
reflection even in CDSL’s tariff structure. CDSL does not collect any custody or ISIN
charge from the DPs and the transaction charges have always been pegged at levels
reasonable and competitive by industry standards. With CDSL’s extensive DP network,
local market expertise, advanced technological solutions and comprehensive range of
depository services are offered to all types of discerning investors viz. individuals,
corporate, financial institutions, foreign institutional investors and mutual funds the
convenience to handle their securities efficiently at affordable costs.

Depository of choice of the Government of India

CDSL has the privilege of being the depository of choice of the Government of India for
the on-going Public Sector Undertakings (PSUs) disinvestments programme. The
Government of India chose CDSL exclusively for dematerialization and cross deal
transactions in Oil PSUs (ONGC, IOC & GAIL) and to handle the entire process of
dematerialization and subsequent disinvestment in Bharat Aluminium Company Limited
(BALCO). The transaction of BPCL acquiring equity stake in Kochi Refineries Ltd.,
from the Government. Of India, was also done through CDSL. More recently the
disinvestments of Government stake in CMC, VSNL, IBP Ltd. and Hindustan Zinc
Limited were exclusively done through CDSL.

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CHAPTER-11
FINDINGS

• Numbers of companies linked with NSDL are more than CDSL.

• NSDL is connected with 10 stock exchange and DSL with only one.
• NSDL having more numbers of DP's (i.e. 103) than CDSL(31)
• NSDL having more investors than CDSL.
• Brokerage is high compared to offline
• Less privacy due to hacking scandals.

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CHAPTER-12
SUGGESTIONS

• The companies should come up with more and more innovative features in their
web portals.
• The customer should be educated regularly regarding the new technologies and
techniques of trading online and other relevant information.
• The companies should look after to develop more safe and secure ways of
transacting business online.
• The companies should make maximum efforts to detect fraud cases and minimize
them.
• Brokerage should be low.

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CHAPTER-13
CONCLUSION

The online trading is growing with a rapid pace with the rising level of education among
the customers. The other factors being that the Indian Investor nowadays wants to deal
himself in trading rather than depending upon other middlemen. They also consider the
factors like time saving in doing the online transactions, convenience etc. Although some
people feel that online trading is not secure but the people doing the trading online is
happy about the increasing security concerns among the companies. The year 2008 has
not been so good for the stock market and the Sensex and Nifty has been dipping and
affecting the business negatively for these companies. This is due to the fact that at these
times people do not prefer to open the DEMAT and Trading accounts. So the companies
have to reduce their account opening fees to attract more and more customers. Also
people trade very less in the bearish market and the company’s profits against brokerage
fees soars downwards. It is also a found fact that during the bearish market the ratio of
online trading becomes very less. In addition, there is an intense competition among the
companies and the companies come up with new and new promotion schemes such as
discounted and negotiable brokerages, Zero balance accounts, waiving a/c opening fee
and AMC etc. As the internet penetration is growing in India this business holds a huge
potential for growth. The mantra for success in the current situation will be educating the
customers about the benefits of online trading and the amount of ROI that can be
generated through it. The total trading volume of brokerage companies has increased
from US$1239.1 billion in 2004 to US$1492.1 billion in 2005, and is expected to reach
US$6535.7 billion by 2015

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CHAPTER-14
BIBLIOGRAPHY

• http://www.religare.in/ourleaders.asp
• http:/www.religare.in/wealth-spectrum.asp
• http://www.religare.in/retail.asp
• http://www.religare.in/institutional.asp
• http://www.religare.in/globalassetmgt.asp
• http://www.religare.in/research.asp
• http://www.cdslindia.com/abt_cdsl/introduction.htm
• http://www.cdslindia.com/abt_cdsl/promo.htm
• http://www.cdslindia.com/abt_cdsl/mngmt.htm
• http://www.cdslindia.com/abt_cdsl/whycds.htm
• http://nsdl.co.in/downloadables/businesspartners.pdf
• http://www.nse_india.com/content/ncfm_modules.htm#refh15.6

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