Every new investor who enters the market will come across the term – Depository Participant. No investor in the equity market can engage directly in trade with the stock exchange and must instead do so through an intermediary – referred to as the Depository Participant or DP. The role of the Depository Participant is multi-fold, aiding the stock market with seamless transactions and, at the same time, permitting investors to freely trade in the stock market. This article will define who and what a Depository Participant is, the types of Depository Participants in India, and the functions they undertake.
A Depository Participant, commonly referred to as a DP, is the registered stockbroker of a particular depository. A depository refers to the entity that retains the investor's securities, going through the depository participant, aiding the investor to trade freely in these securities. These securities are held in debentures, bonds, mutual funds, shares, and securities, all in electronic formats. Put simply, a Depository Participant acts as an intermediary between the company that issues the shares, and the shareholders, helping investors set up and maintain their Demat accounts.
In India, there exist two kinds of Depository Participants:
A Depository Participant, registered under the NSDL or the CDSL, is liable to undertake the following functions:
Before choosing a DP, every investor must consider three factors – (a) the technology and trading platforms offered by the DP, (b) the reputation of the DP, and (c) the charges levied. For further assistance with opening a Demat account, we at Motilal Oswal offer you simple solutions just a click away.
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