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CS Professional · Strategic Management and Corporate Finance · Role of Intermediaries in Fund Raising

Which function is performed by a depository but NOT by a stock broker?

Holding securities in electronic form and effecting transfers by book entry is the function of a depository. Stock brokers instead execute orders on the exchange, issue contract notes and act as exchange members for clients, so those functions do not distinguish a depository.

  1. AMaintaining investors' securities in electronic form and recording transfers by book entryCorrect
  2. BExecuting buy and sell orders on the exchange trading platform
  3. CIssuing contract notes for trades done on behalf of clients
  4. DActing as a member of the stock exchange to trade for clients

Explanation

Safekeeping of securities in dematerialised form and book-entry transfer is the depository's core role. Order execution, contract notes and exchange membership are functions of a stock broker. So only the first option is distinctive to a depository.

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