NISM-Series-VI: Depository Operations · Depository and its Business Partners

Depository Business Partners and Agreements Explained

Updated 11 October 2026 · Fact-checked

A depository works with business partners: issuers, registrars and transfer agents (RTAs), clearing corporations, clearing members and stock exchanges. Each link rests on an agreement. The issuer or its RTA signs with the depository so securities can be held in demat form. Clearing corporations connect trades to settlement of securities.

Understand Depository Business Partners and Agreements

A depository does not work alone. It holds securities in electronic form, but it needs other parties to bring securities in, record them and settle trades in them. These parties are its business partners.

The issuer is the company or entity that issues securities. To let its securities be held in demat form, the issuer must have them admitted to the depository. This is done through an agreement between the issuer and the depository. Where the issuer appoints a registrar and transfer agent (RTA) to handle its share registry, the RTA is also involved, and the usual arrangement is a tripartite agreement among the issuer, the RTA and the depository. The RTA keeps the records of holders, processes demat and remat requests for the issuer, and passes on corporate benefits and holder details.

On the trading side, the stock exchange is where trades happen. The clearing corporation (or clearing house) works out what each member must deliver or receive, and guarantees and settles the trades. A clearing member is a member of the clearing corporation who settles trades for itself and its clients. To settle, securities must move between demat accounts. So the clearing corporation and clearing members are linked to the depository: clearing members hold accounts with a depository participant, and the clearing corporation holds its own accounts to receive securities in pay-in and send them out in pay-out.

The depository, the clearing corporation and the exchange are therefore connected through agreements and electronic links. Trades are done on the exchange, obligations are fixed by the clearing corporation, and securities are moved by the depository.

For the exam, remember who does what and which agreement connects which parties. Questions are usually direct: which party maintains the register, which party signs with the depository, and what the clearing corporation does in settlement.

Key formulas to remember

Issuer and depository: Issuer ↔ Depository: agreement to admit securities for demat; Without this, an investor cannot hold that security in demat form.
Tripartite arrangement: Issuer + RTA + Depository: tripartite agreement; Used when the issuer appoints an RTA to keep its records and process demat requests.
Role of RTA: RTA = maintains holder records + processes demat/remat requests + handles transfers for the issuer; The RTA acts for the issuer, not for the investor or the DP.
Role of clearing corporation: Clearing corporation = determines obligations + settles trades + guarantees settlement; It receives securities in pay-in and gives them out in pay-out through its depository accounts.
Clearing member: Clearing member = member of clearing corporation settling for itself and clients; It holds a demat account with a DP for settlement.
Flow of a trade: Exchange (trade) → Clearing corporation (obligation) → Depository (securities move); Use this order to answer sequence questions.

How to solve Depository Business Partners and Agreements questions

Use this method for any question on business partners and agreements.

1Identify the party named in the question: issuer, RTA, clearing corporation, clearing member or exchange.
2Decide which stage is asked about: admitting a security, keeping records, demat or remat, or settling a trade.
3Recall the main function of that party in one phrase, for example 'RTA keeps holder records for the issuer'.
4If the question mentions an agreement, list who signs it. Issuer and depository for admission; issuer, RTA and depository when an RTA is appointed.
5Check the direction of the link. The depository provides the electronic system; the issuer or RTA supplies and confirms the securities.
6Remove options that give a party another party's role, such as the DP keeping the issuer's register.
7Pick the option that fits exactly and matches the stage of the process.

Quickest way: Party-to-job matching

When to use it: Use this when options mix up the roles of different parties.

Link each party to one word: issuer = issues, RTA = records, exchange = trades, clearing corporation = settles, depository = holds.
Match the question's verb to that word.
Strike out options where the verb belongs to another party.
For agreement questions, count the signatories asked for: two means issuer and depository, three means issuer, RTA and depository.

Common mistakes in Depository Business Partners and Agreements

Saying the investor signs an agreement with the issuer to enter the depository.
Students mix the issuer's agreement with the account-opening agreement between investor and DP.
Fix: The issuer's agreement is with the depository. The investor's agreement is with the DP when opening an account.
Treating the RTA as the investor's agent.
The RTA deals with investors on transfers and demat requests, so it looks like their agent.
Fix: The RTA is appointed by the issuer and acts for the issuer.
Giving the clearing corporation the job of holding investors' securities.
Pay-in and pay-out involve its accounts, so students think it keeps securities.
Fix: Investors' securities are held by the depository through DPs. The clearing corporation only settles obligations and uses accounts for pay-in and pay-out.
Confusing a clearing member with a stock exchange member.
Many brokers hold both roles and the terms sound alike.
Fix: A clearing member is a member of the clearing corporation who settles trades. Trading and clearing are separate functions.
Reversing the sequence of a trade.
Students jump to the depository because the topic is depository operations.
Fix: Order is trade on exchange, obligation by clearing corporation, movement of securities by depository.

Worked examples

Example 1

Which of the following is the role of a registrar and transfer agent in the depository system?
A. Opening demat accounts for investors
B. Maintaining holder records and processing demat requests for the issuer
C. Guaranteeing settlement of trades
D. Providing trading screens to brokers

Show the solution

The RTA is appointed by the issuer, so its work is on the issuer's side.
Opening demat accounts is the DP's job, so A is wrong.
Guaranteeing settlement is the clearing corporation's job, so C is wrong.
Trading screens belong to the stock exchange, so D is wrong.
Keeping holder records and handling demat requests for the issuer is the RTA's role.

Answer: B

Example 2

A company appoints an RTA and wants its shares held in demat form. Who are the parties to the agreement that brings the shares into the depository system?
A. Investor and DP only
B. Clearing corporation and stock exchange
C. Issuer, RTA and depository
D. Broker and clearing member

Show the solution

The agreement concerns admitting the security, so it involves the issuer and the depository.
Because the issuer has appointed an RTA, the RTA is also a party. This makes it tripartite.
Investor and DP sign the account-opening agreement, which is a different matter.
Clearing corporation, exchange, broker and clearing member relate to trading and settlement, not admission of securities.

Answer: C. Issuer, RTA and depository

Exam tips

Expect direct match questions: party and role. Learn the one-line role of each partner.
If an option names the DP for the issuer's register or the RTA for opening accounts, reject it.
Watch the number of signatories in agreement questions: two or three.
For settlement questions, keep the order: exchange, clearing corporation, depository.
NISM-Series-VI has negative marking of 25%, so eliminate wrong roles first and guess only after narrowing down.

Practice questions from Depository and its Business Partners

Depository Business Partners and Agreements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveRegistration and Agreements of Depositories and Participants

Depository Business Partners and Agreements: frequently asked questions

What does a registrar and transfer agent do in the depository system?

The RTA works for the issuer. It maintains the records of holders, processes demat and remat requests, and handles transfers. It also coordinates with the depository on the issuer's behalf.

What is the tripartite agreement in a depository?

It is an agreement among the issuer, its RTA and the depository. It lets the issuer's securities be held and dealt with in demat form.

How do the depository and the clearing corporation interact?

The clearing corporation works out the securities each member must deliver or receive. The depository moves those securities between demat accounts, including the clearing corporation's accounts for pay-in and pay-out.

Who is a clearing member?

A clearing member is a member of the clearing corporation who settles trades for itself and its clients. It holds a demat account through a DP to deliver and receive securities.