Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 63

A depository is a facility for holding securities in electronic form so that the purchase and sale of shares can take place via a process of book entry. The shares may be either dematerialized or immobilized. The term dematerialization refers to the replacement of physical share certificates by electronic records. On the other hand, if the securities were to be immobilized, an electronic record would be created without destroying the original physical certificates, which would continue to be held in secure storage.

The function of a depository is akin to that of a commercial bank. We will illustrate the similarities with the help of a simple tabular format as shown in Table 1.1.

The benefits of holding securities with a depository in dematerialized form are as follows.

1 It offers a safe and convenient way to hold securities.

2 It facilitates immediate transfers of securities.

3 No stamp duty is payable in most cases when securities are transferred in dematerialized form.

4 Transfer of shares in physical form has certain attendant risks such asBad deliveryFake certificatesDelaysTheftsThese can be eliminated by holding securities in dematerialized form.

5 There is considerable reduction of paperwork involved in the transfer of securities.

6 There is a reduction in the transactions costs involved in securities trading.

7 The concept of lot size has no meaning. Even one share can be bought or sold.

8 Nomination facility is available.

9 A change of address of holders gets registered with all the companies in which they hold securities. This eliminates the need for them to correspond with each company individually.

10 If there is a corporate action such as a stock dividend or a stock split, the shares are automatically credited to the investor's account.

TABLE 1.1 Commercial Banks and Depositories (Similarities and Differences)

Commercial Bank	Depository
Holds funds in an account	Holds securities in an account
Enables fund transfers between accounts after receiving instructions from the account holder	Enables transfers of securities between accounts after receiving instructions from the account holder
Facilitates transfers of funds without having to handle money	Facilitates transfers of share ownership without having to handle securities
Facilitates safekeeping of money	Facilitates safekeeping of securities