NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository
Anita sells shares held in demat form. Which of the following correctly describes the role of the depository in this process?
The depository keeps electronic records of holdings and transfers securities between accounts by debit and credit entries on instructions routed through DPs. It does not fix prices, guarantee trades or handle sale money, which are functions of exchanges and clearing corporations.
- AIt maintains records of holdings and effects the transfer by debit and credit entries on instructionCorrect
- BIt decides the price at which the shares are sold
- CIt acts as the counterparty to the buyer and seller for trade guarantee
- DIt receives sale proceeds and pays them to the investor
Explanation
The depository maintains electronic records of ownership and effects transfer of securities on instructions through DPs. Price discovery is by exchanges, and trade guarantee and funds settlement are handled by the clearing corporation, not the depository.
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