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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository

Mr. Iyer holds shares in demat form and wants to sell them. In the depository system, which statement correctly describes the role of the depository with respect to his securities?

A depository holds investors' securities in electronic form and records changes in ownership through book entries. It does not operate a trading platform, determine prices or issue new shares, which are the roles of exchanges, the market and issuers.

  1. AIt holds the securities in electronic form and records ownership changes through book entriesCorrect
  2. BIt acts as the stock exchange on which his shares are sold
  3. CIt decides the price at which his shares will be sold
  4. DIt issues fresh shares to him in place of those sold

Explanation

A depository holds securities in electronic form and effects transfers through book entries, avoiding physical movement of certificates. It does not run trading, set prices or issue shares; those are functions of exchanges, the market and the issuer.

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