What Does it Mean to be a Depository Participant

Just as you cannot open a bank account directly with the Reserve Bank of India, you cannot conduct trade directly with a stock exchange. This is the point at which a depository participant comes into the picture. The depository participant not only makes things easier to run for stock exchanges but permits investors and traders a host of trade options. Examples of depository participants in India include Sharekhan, Motilal Oswal and Angel Broking, among others. It is important to know what role depository participants play if you want to trade in securities. However, first you should know what a depository is.

What is a Depository

A bank holds your funds, and just like that, a depository contains your financial assets. A depository is a financial institute that does this and you have to pay certain dp charges to open an account with a depository participant linked to a main depository. The depository has the responsibility of keeping your financial assets like bonds, mutual funds, stocks, and other assets in dematerialized format safe. India has two primary depositories - NSDL (National Securities Depository Limited) and CSDL (Central Depository Services Limited). Since it isn’t possible to open an account and trade directly with either of these bodies, depository participants step in. 

Who Is a Depository Participant

You can think of a depository participant as a mediator between CDSL and NSDL, and traders and investors. Essentially, a depository participant means a place that resembles a bank that stores money and conducts transactions. Instead of money, a depository participant acts as a store of assets such as securities. With a DP or depository participant, you can open a Demat account and store securities and then trade with them as your account may be linked if you open a trading account. Serving as an agent of one or both the NSDL and CDSL, a depository participant helps you manage your assets efficiently. 

The Role of a Depository Participant

Now that you have enough understanding as to what is depository participant, you may want to know why you need one. This can be best explained by knowing the role of depository participants, described below: 

1. Eliminates Unnecessary Paperwork - Previously, trading produced a massive amount of paperwork with investors keeping track of assets. Through a depository participant, all this is managed digitally and conveniently.
2. Eliminates Fraud - Since the processes of a DP are executed electronically, they are safe and you don’t have to take care to prevent loss/theft of physical assets. 
3. Rapid Processes - In line with depository participants working in a transparent and efficient manner, the whole process of buying assets, storing them and trading with them is quicker than it was earlier. 
4. Managing Bulk - Since depository participants execute all their business online, managing affairs with a bulk of investors becomes easy. 

Final Asset Speak

Depository participants include banks and finance companies such as Motilal Oswal, a key player in asset management companies, that can help you not only create wealth, but hold onto it. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account