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

Ms. Neha Iyer asks why a depository, rather than the company itself, can register transfers of her dematerialised shares when she sells them. Which feature of the depository system explains this?

Transfers in a depository are made by book entry, meaning the seller's account is debited and the buyer's account is credited. This removes physical certificates and transfer deeds, and avoids issuer approval of each trade, which makes settlement faster and safer than the physical system.

  1. ATransfer by book entry, with no need for a share transfer deedCorrect
  2. BMandatory physical delivery of certificates to the buyer
  3. CTransfer only after the issuer approves each trade
  4. DTransfer only through the registrar's physical register

Explanation

In a depository system, ownership changes by debit and credit entries in the BO accounts, called book entry transfer. This removes the need for physical certificates and transfer deeds. The other options describe physical-market processes or approvals not required for demat trades.

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