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CS Executive · Capital Market and Securities Laws · Secondary Market in India

Rohan holds shares in dematerialised form. He wants to sell them and instructs his depository participant (DP) to transfer them for settlement. What is the role of the DP in this structure?

A depository participant acts as the agent of the depository and maintains the investor's demat account, processing transfers of securities. It does not guarantee trades, which is the clearing corporation's function, nor does it underwrite securities or frame listing rules.

  1. AIt acts as the agent of the depository and maintains the investor's demat accountCorrect
  2. BIt guarantees settlement of the trade as a central counterparty
  3. CIt frames listing rules for the exchange
  4. DIt underwrites the securities sold by Rohan

Explanation

A depository participant is the agent of the depository and provides the investor with an interface to hold and transfer securities electronically. Guaranteeing settlement belongs to the clearing corporation. Underwriting relates to public issues, not secondary sales.

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