TABLE OF CONTENT PROJECT REPORT

ON

Demat Feasibility & working of HSL AS A Depository Participant

Submitted For The Partial Fulfillment Towards The awards of the degree Of Master Of Business Administration

PROJECT GUIDE

Mr.Neeraj gogia

SUBMITTED BY

Gunjan Goyal

Roll No.-0700370016

MBA 4th semester

B.M.A.S. Engineering College, Keetham, Agra

Uttar Pradesh Technical University, Lucknow

(2007-09)

DECLARATION

I, Gunjan Goyal, student of MBA-4th Semester, B.M.A.S Engineering College, Agra hereby declare that the Summer Training Project titled Demat Feasibility & working of HSL as a depository participant is the outcome of my own work and the same has not been submitted to any other University /institution for the award of any degree or professional diploma.

DATE:

PLACE: GUNJAN GOYAL

ACKNOWLEDGEMENT

First and foremost I would like to express my sincere gratitude to Mr.Hem Chand Jain, Director of Hem Securities Ltd. Jaipur Branch for giving me an opportunity to perform my project in this organization .

I am grateful to corporate guide Miss. Nisha Sharma, DP Head, who has been an inspiration for me, who has shown me the light of corporate world, who has guided me eloquently during my project work and who has been my mentor through out my project.

I would also like to pay the acknowledgements to all the corporate executives, for taking out time from their busy schedule and providing the relevant information, which contributed significantly to the project analysis.

Finally, I would also like to thank all my dear friends for their kind cooperation, advice and encouragement during the long and arduous task of preparing this report and carrying out the project. And last but not the least, my family members whose blessings, inspiration and encouragement have resulted in the successful completion of this project.

EXECUTIVE SUMMARY

Securities market is one of the leading Markets. Mainer services are related to this market. And there are many organizations, which are providing services to the participant of this securities market. There is lots of competition in this market and as my topic of summer internship is Demat feasibility, so I got to know many things about this industry.

To understand about this market and to know about the competition among different securities related organization, I have prepare a different part that is industrial scenario. From this part I got to know about the different competitors, their offering, their present position etc.

Hem securities limited is also an active part of this industry, which provides different type of services to its clients. Hem securities limited is a part of Hem group. It has made a significant place in stock market by its operations in different services. It is a well-regulated organization, which is giving tough competition to many players of this market. It is present in Equity market, Derivative market, Futures trading in commodities and it is working as a depository participant also, and it is running successfully as a Depository participant.

Hem securities limited is associated with CDSL (Central Depository Services Limited) and to perform the operations of DP it is using software called CDAS, Masters application, Being a Depository participant it is performing many operations like opening and maintenance of Demat account, dematerializing the share certificates, rematerializing the shares, settlement of trades, pledging, unpledging, managing Demat accounts according to the corporate actions, transmission etc. It is performing all its operation very efficiently.

As there are many DPs in jaipur, some of them are associated with CDSL and some are associated with NSDL. All these are performing their operations on the basis of guidelines provided by SEBI. Although all of them are performing almost in the same pattern but still to find out the feasibility for Demat account Holders in Hem securities limited a research has been conducted. The main motive of this research is to compare the DPs in jaipur. For this research purpose only 6 DPs have been taken, and on the basis of findings from this research some conclusion has been drawn.

TABLE OF CONTENT

I. Introduction

1. Industrial Scenario

2. Organization Profile

3. Organization Structure

4. Objectives of study

II. Body of Dissertation

1. Research Methodology

2. Data Analysis and Interpretation

3. Findings and Solutions proposed

4. Suggestions for implementation

III. Summary and Conclusion

IV. References and Bibliography

I. INTRODUCTION

NEED OF STUDY

There is a need of complete implementation of prevailing Demat account in present scenario.

Dematerialization of securities is the basic trend followed by most of the securities institutions in securities market.

Dematerialized form of securities help all investors and financiers in scrip-less trading and maintaining an account in reasonable & convenient form with ensuring safe and security.

SCOPE OF STUDY

The scope of this complete implementation of Demat account will be beneficial to National Stock Exchange to a greater extent in getting all subscriptions in electronic form with complete data-records.

This is the main motive for which I have conducted research undergoing the comparison of other securities institutions with the application of certain analytical and statistical tools to make it universally applicable with all possible efforts.

1. INDUSTRIAL SCENARIO

The stock market industry is one of the main industries of any country, which contribute to the economy of the country up to a large extent. The main operation of this industry is buying and selling of shares, this market has given a vast opportunity of employment in India because many Indians are indulges in this market. The Indian Securities Market is one of the Indias leading markets. The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In India, in addition, there are 22 Regional Stock Exchange. However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80 percent of the equity volume traded in India. Both exchanges have a different settlement cycle, which allows investors to shift their positions.

The main focus of this industry is shares. Earlier the shares were in the form of physical certificate but now approximately 99.99% companies are using electronic mode of shares. This electronic mode of shares had removed many problems that were there with physical share certificates. The electronic shares are called demat shares. In India There are two depositories, NSDL & CDSL, which handle the demat form of shares, they work like the main authority and under them there are depository participants.

These depository participants (DPs) handle the whole work related to demat shares. Presently there are many DPs in India. Around 200 "depository participants" (DPs) offer the demat account facility. Earlier there was not so much competition among them as there were not so much DPs because many of them were afraid that whether this demat mode of shares will be accepted by people or not but as the popularity of demat shares, demat account grew and SEBI declared that all the trades done in stock exchange will be done only in Demat mode many other DPs enter in to this market. And the number of DPs is increasing day by day. Presently there is a big competition within this industry; there are few key players also of this market. Few competitors of this industry are Indiabulls securities limited, ICICI direct.com, HDFC, Rellegare, Hem securities limited, India Infoline, Alankit, Mantri, Anand Rathi etc.

Many banks are also providing the demat account facility and Banks are advantageous because of the number of branches they have. Some banks give the option of opening a demat account in any branch, while others restrict themselves to a select set of branches. Some private banks also provide online access to the demat account. So, clients can check on their holdings, transactions and status of requests through the net banking facility. A broker who acts as a DP may not be able to provide these services. Many of the DPs are working on national level and some of them are providing their services up to local level. But key players cannot underestimate these local players because these local players have captured major portion of this market. These local players are increasing their area of providing services. So all these DPs need to be very careful in providing services to the clients. Most of the DPs are providing different type of services to their clients. Although SEBI has provided the guidelines to the DPs to work in a prescribe format so they have to perform most of the operations in the same format but still they have the opportunities to prove themselves better than others in many ways.

Usually this is the mentality of clients that they will open a trading account also with the same organization with which they have their Demat account. And the number of trading account depends upon many factors, like, whether the organization is providing funding facility or not if yes then how much, what are the brokerage charges etc. so the number of Demat accounts also depends upon these facilities.

Competition within the industry

As the competition in this industry is very high and it is not an easy task to compete in this industry. There are lots of new companies coming in this business. This market is center of attraction to new entrepreneur because it is already successful market and it is for sure that it will grow further, and there are many opportunities lying ahead in the way.

Hem securities limited has established its own identity among the investors but it also has to face competition from its competitors. It has many competitors, some of them are described below: -

Indiabulls

An Indiabulls security limited is one of the leading companies in securities market. It offers different type of financial product to their clients, these financial products are: - Equity, Mutual Fund and Insurance. Their Equity product includes Normal indiabulls, Power indiabulls and Equity analysis. It is providing services of DP also and its main DP is situated in Gurgaon. It provides online and offline, both type of Demat account, it also offers Trading account to its Clients. Now it has made it a compulsion to open a trading account also with demat account. It provides margin for intraday and funding facility for six days only.

Anand Rathi

AnandRathi (AR) is one of the leading securities firms providing the entire range of financial services. AR provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage & distribution of equities, commodities, mutual funds and insurance - all of which are supported by powerful research teams. Its products include Demat and trading accounts. It provides margin for intraday to its clients, it does not provide funding for delivery.

ICICI Direct.com

ICICI Direct.com is the most comprehensive website, which allows its clients the opportunity to invest in Shares, Mutual funds, Derivatives (Futures and Options) and other financial products. They offer their clients a product for every investment need. This provides the facility of cash trading, margin trading, margin plus trading, spot trading and BTST (Buy today and Sell tomorrow) facility to its clients. It also provides the facility of margin and funding for facilitating its clients to trade with more money. It has also the policy to open a saving bank and trading account also with Demat account. This complete package is for 750 Rs. and 500 Rs. AMC. There is one more policy if you will invest 20,000 Rs. in its Mutual Fund then the account opening cost will reduce to 1 Rs. and AMC for two years will be exempted. This provides the facility of overseas trading also, which is a unique facility, which others are not providing.

India Infoline

India Infoline Limited is listed on both the leading stock exchanges in India, the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business. Its financial product and services are related to: Equity, commodities, insurance, research, Wealth management services etc. Its special feature is that it is not charging any kind of AMC and it is providing margin for intraday and funding for delivery to its clients.

Mantri share broker limited

Mantri Share Brokers Private Limited is a corporate member of National Stock Exchange of India Ltd. The company is doing business of Equity and derivative Broking with commitment of highest standards of transparency and services. The Core business of the company is to provide secondary market (Equity and Derivatives) broking services to Clients.

Some of the imported services commenced by the group on a large scale are stock broking, Commodity Broking, IPO Marketing, DP related services and Dematerialization etc. These Services are being carried out on Mantri Share Brokers Private Limited.

Pace

Pace is one of the successful organizations in the field of securities market. It is Gurgaon based company. But it has branches in almost every part of India. It is providing different type of financial services to its clients. It is working as a stockbroker, commodity broker and depository participant in India. Its product includes Demat account and Trading account. It provides funding facility for its trading account holder on the basis of the holding of their Demat account, which allow its investors to purchase shares in more quantity. Its main DP is in Gurgaon so its operations are initiated from that main DP itself. The number of its Demat account holder is increasing day by day because of the facilities provided by Pace to its account holders.

Sherkhan

Sherkhan is also one of close competitors of Hem securities limited. It facilitates its clients in many ways. Although it is not as big competitor for Hem securities limited as its other competitors like Indiabulls, ICICI Direct.com, etc. but it is still going forward speedly by winning the trust of its clients. Its product range includes classic trade, speed trade and speed trade plus, which facilitates its clients during trading. It also has the procedure for providing the margin and funding facility to its clients.

2. ORGANIZATION PROFILE

Hem Securities Limited (HSL) is established in Jaipur city. It has branches in almost every part of India. But its main office is in Jaipur city because Jaipur is its origin place.

Mr. Hem Chand Jain established this organization. This organization is the work of Mr. Jains dedication and his vision. He had made this organization from nothing to such a big organization.

Hem Securities Limited is a part of HEM GROUP. This group pioneered its business in financial service market products in Jaipur in 1981 with the establishment of their original firm in the name of M/S H.C.Jain & Co. and then it became a member of Jaipur Stock Exchange in 1983.That was a good sign for the organization to progress in future, and from there onwards this group doesnt look back and move further on the path of success. This group started its work with a vision to get success and trust of its all clients, and work hard to achieve them by moving further with its own principles. This group has steadily spread its wings in all important financial markets and exchange to provide new, better and all possible avenues. From its incorporation, this group is working very hard and winning the trust of its clients by providing different type of services to them. And the future plan of this group is, to operate at a most successful level by satisfying more and more clients and by coming up with its own shares so that it will increase the worth of the group and will become able to fight with the competition under this industry.

Reasons behind the position of this group are commitments and high regards for ethical and transparent business practices, dynamic management and the sound investment in cutting-edge technology which provide transparent and well integrated trading system to their business associates and ultimate retail investing clients. As this group completely understand that by the time it is better to change accordingly, otherwise it will be very hard to survive, and changes in this market (security market) are very often so they adopt the latest technologies and different type of back office Softwares which are made especially to fulfill the requirement of this group and to serve up to the best level to the clients.

Here in this group the working infrastructure is considered very important, because if the working condition will be good and modern then it will be easy for employees to work for long hours with full spirit and enthusiasm. As now a day employees are mobile because there are many opportunities for talented people, so to retain the talent in the organization it is required to provide some additional facilities. It is important that employee feel themselves comfortable and familiar in the organization. In present conditions, employees put more of their emphasis on the working condition of the organization and if we want employees to work properly then we have to take care of all the important aspect that are related to them. This is becoming the culture now a days to facilitate the employees for having the healthy organization because employees are considered the valuable assets not a machinery, and to retain the talent is the main task of organization and HEM GROUP understand and follow that very well. They are trying to maintain & develop the new technology & are also trying to increase their employees knowledge for benefit of the group, and they are providing them particular information so that it may help them to overcome from their own weaknesses & prepare them to move forward by keeping main objectives of the organization in mind.

There are some milestones for the group, which have the great role in the position of the company, these milestones have drastically changed the position of the company and move it ahead from what it was previously. These milestones changed the fate of the group. The group became able to have these milestones because of its continuous and dedicated performance. These milestones are: -

1983- M/S H.C Jain & Co., Jaipur commenced its venture in financial web world in the country as a member of JSE (Jaipur Stock Exchange).

1995-M/S HEM SECURITIES LIMITED, the flagship company of the HEM GROUP acquired the membership of the Stock Exchange, Mumbai.

- M/S HEM SHARE BROKER LIMITED, another HEM group company acquired the membership of OTC Exchange of India.

1999-M/S HEM SECURITIES LIMITED acquired upgraded membership of the BSE to the level of the composite corporate membership.

2000-HSL became the trading member of the BSE, for the derivative segment of the BSE, enabling the HEM GROUP to spread and carry its broking network, providing new avenues for investment and profit making, to the doorstep of the rural masses in the countryside.

-M/S HEM FINLEASE PVT. LIMITED became the member of the NSE of India limited.

2001-M/S HEM FINLEASE PVT. LIMITED acquired the membership of future and option segments of the NSE of India limited.

2004-HEM GROUP acquired the membership of the national commodities & derivatives exchange limited in name of M/S HEM MULTICOMMODITIES PVT. LIMITED. It got the membership of both MCX and NCDEX for trading in commodities and derivatives since January 2004.

2006-HFSL introduces online IPO and Internet trading.

2007-HEM group makes its presence in India through more then 250 business outlets covering more then 90 cities.

These were the milestones, which change the HEM GROUP completely and launch it on the path of success. This group claims that many more these type of milestone are about to come which will take the company at height of success like it is planning to launch its own share in the market which will again change the future and image of the company.

The success of this group lies in its working environment. The working environment of this group is very professional and friendly. All the staff members of this group are very close to Mr. Hem Chand Jain. Mr. Jain considers their employees as their family member. They took all their problems as his own. As this group consist many company so he have very big staff and to manage such a huge staff is really very difficult but Mr. Hem Chand Jain has such leadership qualities which helps him to manage with that. He is the main strategist of his own group or we can say that behind every important decision and strategy of the group there is the mind of Mr. Hem Chand Jain. Although Mr. Hem Chand Jain is the managing director of the group still he involves himself in day-to-day activities of the group. He is informed with almost every activity of the group. He is very calm person who handles every dispute related to the group very efficiently. We can say that in this organization, there is chief architect approach, where a person sitting on the top handle all things and disputes related to the organization, although he have many helping hands which helps him in running this organization but overall he is the heart of the group.

As he took care of all aspect related to the employees of the organization so in the return of that all his staff members work with great dedication and sincerity.

In this group, there is a culture of corporate citizenship, where employees participate in the organizations welfare apart from the work what is assigned to them, In other words,

We can say that they all work voluntary also when there is requirement of that. We can see their dedication for the group by looking at the issue of reliance power. At that time there was lots work but limited time, at that time all the employees not only give their hundred percent but they work beyond their working hours. That is the best example to see the attitude of employees towards group. All the employees also give their best for the improvement and success of the group.

Here, in this group customer is considered as God and the employees treat him very well. The main policy of the group is that The success lies in the satisfaction of the customers, so they considered that if their clients will be satisfied with the services provided to them then only this group could achieve its dream to be most successful. And to work according with that policy they have instructed their employees in such a way so that each and every client will be satisfied. Dissatisfaction of even a single client is considered a failure of the group. In this way they are very careful with the client aspect and adopt all the measure for the satisfaction of the clients.

HEM GROUP provides different type of services to their clients. These services can be called the salient features of the group. Some of These salient features are mentioned below: -

1. This group allowed single screen trading in all market segment like in BSE/NSE/MCX

And NCDEX.

2. This provides maximum exposure against margin.

3. This provide the service of daily multiple research call flashes on trading screen during

Trading hours.

4. This provides powerful online back office for accounts.

5. This provides online depository back office.

6. There is hassle free auto pay in of shares.

7. This provide banking gateway through HDFC bank. Other bank cheques can be

directly deposited in the accounts.

8. This provides discounted brokerage for e-broking clients.

At present, this group is working with various stocks and commodity exchange so this group is having their corporate offices in Mumbai and Jaipur with numerous business

associates spread over many cities through out the whole country to handle the business.

Company in equity market

In equity market, the HEM GROUP has acquired the knowledge of the financial markets of the country during the last 24 years of its business. The group and all companies can boast sound domain knowledge because its professional management and manpower are well assisted by the hi-tech upgraded infrastructure, which has been put in place at a huge cost.

This group serves multitude of their retail-investing customers through their own corporate offices in Mumbai and Jaipur with numerous business associates spread over many cities through the whole country. It is the matter of proud for this group that it is serving more than 50,000 end use retail investors.

Company in derivative market

In derivatives also, HEM GROUP has promptly taken a plunge in making huge investment to obtain membership of all concerned exchanges and has upgraded its technology to serve all their business associates and investor to provide them better and varied opportunities for profit making and capital appreciation.

In this derivative market this group has achieved: -

M/s. HEM Securities limited has become trading member of Stock Exchange, Mumbai (BSE) for derivatives segment in March 2000.

M/s. HEM Finlease private limited, has acquired membership of futures and options segment of National Stock Exchange of India ltd.(NSE) in 2001.

M/s HEM multi commodities private ltd., too has acquired membership of both MCX and NCDEX for trading in commodity derivatives since January 2004.

They feel very happy to pronounce that they have recorded excellent progress in having very deep and wide client base from multi-centers and multi-states in the country with good turnover in a wide spectrum of commodities. They are in a fast pace growth mode in this vital segment and they wish to double-up and develop their client base to many more centers and states to offer better services of HEM GROUP resulting in ever increasing profit making chances to their existing and prospective clients.

Companys future trading in commodities

As regards futures trading in commodities is concerned, it has resulted in transparent and fair price discovering on account of large scale participations of entities associated with different value chains and reflects views and expectations of wider section of people related to these commodities. Futures trading also provide effective platform for price risk management for all segments of market participants ranging from producers, traders, processors, exporters/importers and end-users of the commodity.

Futures trading in commodities has opened up spectacular growth opportunities and advantages not only for large cross section of market participants like producers, processors, traders, corporates, trading centers, importers, exporters, cooperatives, industry associations but for investors community too. It offers unparalleled efficiencies, unlimited growth and infinite rewarding opportunities to all market participants and investors.

This market affords a very dynamic field for diversified investment and trading opportunities in addition to equity markets. The immense benefits of futures trading are opened, for all market participants and investors alike, to be realized.

In our country, Multi Commodity Exchange of India (MCX) and National Commodity and Derivatives Exchange ltd. (NCDEX) are two state-of-the-art commodity-trading platforms for future trading, which commenced operations in November and December 2003 respectively. Both of them are related to national level, hi-tech driven and online commodity exchanges, which provide a very wide spectrum of derivatives driven by best global practices, professionalism and transparency for all market participants. Both MCX and NCDEX- are headquartered in Mumbai and expert Management Teams with deep domain knowledge of commodity futures market having integrated dedicated resources and infrastructure leads these.

Following are some of the commodities traded on the MCX and NCDEX: -

1. Bullion - Gold, Gold M, Gold HNI, Silver, Silver M.

2. Oil and oil seeds - Castor Seed, Soy Seeds, Castor oil

3. Spices - Pepper, Red Chili

4. Metal - Steel Long, Steel Flat, Copper

5. Fiber - Kapas, Medium Staple cotton, Long Staple cotton.

6. Pulses - Chana, Urad, Yellow Peas.

7. Cereals - Rice, Wheat, Maize

8. Others - Rubber, Gur, Cashew Kernel etc.

The term commodity segment is one of the popular pillars of the strength of the HEM GROUP. Therefore due to positive and enthusiastic response from their business associates and their retail clientele spread over many trading centers in multi-states.

The constituents of HEM GROUP are well served by M/s. Hem Multi Commodities Pvt. Limited, from Jaipur and Mumbai corporate offices. M/s. Hem Multi Commodities Pvt. Limited has become trading and clearing member of both the commodity exchanges, viz, MCX and NCDEX since January 2004. HEM GROUP has made huge investments in acquiring membership of the two exchanges and technology up-gradation for best of services to all of their constituents.

The performance of the HEM GROUP in this segment has been very satisfying one due to whole-hearted involvement and encouraging response from their business associates and retail investor-clients spread over many trading centers in multi-states in the country.

The HEM GROUP is in the high gear still to cover many more cities and trading centers in wider variety of commodities reaching out to more and more retail end-use investors to realize the countrys dream of making the India an international hub of trading in many agricultural commodities and precious metals.

Company as depository participant

Capital market in India have been growing at a tremendous pace in terms of market capitalization and number of investors, so as to facilitate paperless settlement, involving buying and selling and transfer of shares and securities in the country, the government of India promulgated the depository act, 1996 in August 1996.

A depository is the authority that holds shares and securities in electronic form in the holder name just as a bank holds their deposits in their accounts. Besides holdings securities a depository also provides services related to accountholders transaction in securities.

Depository works only as an authority, under this there are Depository Participants (DPs) to work. So Hem Securities Limited (HSL) works as a DP.

HSL has got approval from CDSL and SEBI authority under the Depository and Participants Regulation, 1996 in 2000 for their two main DP offices at Mumbai and Jaipur that are located as corporate offices. Further, HSL has branches at following ten centers: -

Assam : Guwahati

Maharashtra : Mumbai

Madhya Pradesh : Gwalior

Rajasthan : Jaipur, Bikaner, Kota, Bharatpur, Alwar, Indore, Hindaun.

They have so far opened more than 50,000 demat accounts in which very sizeable amount of shares and securities are held by their investing and trading clients. In a short, span of 4 years they have been successful in opening so many accounts. Due to their best of services as DP to their clients, they have changed their competitive fees to their clients in respect of their host of services.

HSL is in the growth mode, they are likely to open more branches to reach out to many more of their customers in other important centers while at present, they are affiliated to CDSL as their DP, they shall also get affiliated to NSDL as their DP.

They offer following services as DP: -

1. Opening of demat account.

2. Dematerialization of shares.

3. Rematerialization

4. Maintaining record of holding in electronic form

5. Settlement of trades by delivering/receiving underlying securities.

6. Settlement of off-market trades

7. Providing electronic credit in respect of securities allotted under IPO

8. Receiving non-cash corporate benefits, such as allotment of bonus & right shares, stock split etc. pledging and unpledging of securities.

9. Providing periodical settlement of transactions.

10. Registering nomination.

At HSL, they also offer client the facility called easiest electronic access to securities inference and execution of secured transactions.

As a depository client they can submit debit and credit transaction to get Off-market, On-market, Inter-DP and Early pay in transactions. Clients can also view their holdings and they can obtain transaction details for preceding seven days.

Divisions of the HEM GROUP

This group is further divided in five divisions. These divisions or companies are: -

1. HEM SECURITIES LIMITED

2. HEM FINLEASE PVT. LIMITED

3. HEM MULTICOMMODITIES PVT. LIMTED

4. HEM FINANCIALS SERVICES PVT. LIMITED

5. HEM SHARE BROKERS LIMITED

All these are performing different types of functions but the aim is same, to satisfy the client and to work for the success and welfare of the group. All these are separate entities and they work separately but there is connectivity and full of cooperation among them that is the reason for the success of the whole group. This is the plan of management that In future as the business of this group will grow, these companies will become the subsidiaries, like they all will operate as different subsidiaries. The different workings of these companies are mentioned below: -

Hem Securities Limited

HSL is providing different type of services to its clients. These services are: -

1. Different services as a depository participant,

2. Research & analysis related services,

3. Risk management related services,

4. Trading in shares related services,

HSL is working as a Depository Participant. It is a successful DP. It is serving all its clients very efficiently. As a depository, it is linked to CDSL, and it is following all the guidelines provided by CDSL. At the time of reliance powers IPO, HSL worked as a DP very hard. It opened many demat accounts at that time and for this staff worked very hard.

HSL has one research department also. The work of this department is to forecast the future and come up with estimation on the working, price and profit from shares and securities. They provide guidelines to their clients regarding trading in share market.

This department is working very hard to come up with almost correct estimation regarding shares/securities and its market.

The advice of this department matters very much for the investors. There are many shareholders whose decisions or trading is done on the basis of the forecasting of this department.

This department uses many tools for forecasting and providing the accurate results; this department has very efficient, hardworking & dedicated working staff. They work on topics like equity research, market research, profits from different type of offerings and many more. There work is very hard, because it is not an easy task to estimate about future, it is all uncertain. So they need to be very careful while performing their work. There work provides base for many important actions taken by investors. So HEM GROUP has taken very intelligent and intellectual and highly qualified type of people into their department. They need to be very intellectual so that they can see those things that are not seen by everyone. The success of estimation of this department works for the success of HEM GROUP.

The success and position of HEM GROUP depends very much on the accuracy of the forecasting of this department, all the research employees keep this thing into their mind while working.

So this department is not only an important part of HSL but also for HEM GROUP.

Hem Finlease Private Limited

Hem finlease is one company from HEM GROUP. It was established during 1995-1996, Then it acquired the membership of National Stock Exchange of India in 2000 and the membership in future & option segment of NSE of India in 2001.

At the time of establishment its main objective was to carry on its business as share and stockbrokers, finance brokers and act as sub-broker to execute all type of financial, commercial and trading operations.

There are many services provided to customer by this company. All these services are: -

1. Services related to mutual fun

2. Services related to trading,

3. Services related to risk management,

4. Services related to research,

5. And most of all, marketing of IPO.

This is providing all these services to their clients very efficiently. This is managing all these services very well, and satisfying its clients.

Hem multicommodities private limited

Hem Multi Commodities Private Limited was established with the name of M/s Bairathi Multi Commodities Private Limited in 1995, but in 2004 it changed its name. Now it is known by the name of Hem Multi Commodities Private Limited.

It became the member of National Commodities and Derivative Exchange Limited in 2004; it got the membership of both MCX and NCDEX for trading in commodities & derivatives.

Its main objective at the time of establishment was to carry on the business of trading in agricultural products, metals including precious metals, precious stones, diamond, petroleum and energy products and all other commodities and securities, in spot markets and in futures and all kinds of derivatives of all the above commodities and securities.

Hem Multi Commodities is involved in providing these services: -

1. Research & analysis related services,

2. Trading in commodities market,

3. Risk management of clients.

Hem financial services private limited

Hem Financial Services Pvt. Limited was incorporated in 1990. Hem Financial Services Pvt. Limited is a non-banking financial company. It is performing its entire task under RBI act (1934). As a qualified merchant banker this company provide each and every transaction with confidence, expertise, ability to value the business after analyzing all factors and thus increase in the odds of successful transaction.

This company provides these services as a capital merchant banker: -

1. Private equity placement,

2. Managing the IPO as lead manager,

3. Underwriting,

4. Syndicating IPOs and FPOs,

5. Project counseling and advisory assistance,

This company believes that, it requires specialized expertise to deal with capital market. It is the planning of HFSL that it would offer as a promising company an opportunity to access the capital markets and recognition through their listing on Stock Exchanges. The process of coming up with an IPO and beyond is well handled and escorted by individuals of great caliber and experience that are working here. Their strength lies in making sure that the company is optimally priced and positioned well in the financial marketplace to procure the right profile of institutional and retail investors. They really work hard to achieve these targets.

Hem Share Brokers Limited

Hem Share Brokers Limited was established in 1995, with its establishment, this organization acquired the membership of OTCEI (Over The Counter Exchange Of India). This company is regulated by securities & contracts (regulations) rules, 1957 and the rules, byelaws & regulation of the Stock Exchange.

The main object of the company at the time of establishment were to carry on the business as share & stock brokers, underwriter, sub-underwriter, agents & brokers for taking holds, dealing in converting stocks, shares & securities of all kinds, brokers for units of UTI, broker for debentures, bonds, government securities, national saving certificates, small savings scheme & for securities of all kinds& to carry on the above business in India and abroad.

From the time of its establishment itself it is trying to achieve all these objectives. And now it is successfully running as a brokerage firm. It is providing different service as a broker to its clients. Its long-term objective is to run itself at a most successful level by fighting with competition with the help of its most efficient services and trust of its clients, that it had gain during the entire period of its services.

3. ORGANIZATION STRUCTURE

5. OBJECTIVES OF STUDY

In present era the stock market is one of the popular markets in India, the economy of any country affects very much by the bull and bear condition of the stock market. Previously all trade in the stock exchanges were done in the physical form of the share certificates but presently because of the inconvenience of that physical mode all the trades in stock exchanges are done in demat mode.

Dematerialization is converting physical shares into electronic shares. This mode is very feasible to work with. This demat mode is beneficial for all the investors, companies, stock exchanges etc. For managing the electronic balance of shares into the account, there are depositories. These depositories work or manage through depository participants (DPs).

Being a management student it is really beneficial to know about this present trend of securities and how they are being handled, So I had done my training in a DP. And my main objectives to have my training in HEM SECURITIES LIMITED are: -

To study the demat feasibility in present condition.

To understand the working of HEM SECURITIES LIMITED as a DP of CDSL.

To know the general things about the investment in share market.

Introduction

There is a market called capital market, which is a very important part of Indian financial system. This market facilitates companies by meeting their requirements of the long-term funds. It means whenever the companies require funds for its business operations, it can raise money by issuing equity shares, debentures and etc to the public. These shares & debentures raise the need for such organizations which will facilitate the buying & selling of these shares & debentures. Then stock exchange came into existence.

In this securities market, there are three categories of participants first category contain issuer of securities, second type of participants are the investors in the securities and last category contain intermediaries. The issuers are the borrowers, who issue securities to raise funds. The investors, who have money in surplus to invest in securities and the intermediaries, are the agents who match the needs of users and suppliers of funds by charging commission for that. These intermediaries perform their function to help both the issuers and investors to achieve their respective goals. There are large variety and number of intermediaries providing various services in the Indian securities market.

Meaning of stock exchange

The stock exchange in India has witnessed a spectacular growth during the last decade. The development of the capital market is by and large linked with the development of public limited companies. The stock exchange is an important segment of capital market, which, not only provides capital but also helps investors to trade in the securities. The Stock Exchange is basically a market place where securities are purchased and sold for a consideration through its members acting as brokers. The Stock Exchanges are very important in the economic life of the country. Stock market helps in the growth of industry and trade.

According to sec. 2(j) of the securities contracts (Regulation) act. 1956, Stock Exchange means any body to individuals whether incorporated or not constituted for the purpose of assisting, relating or controlling, the business of buying, selling or dealing in securities.

Importance of Stock Exchange

The Stock Exchange are the important segments of their capital market, if the Stock Exchange are well regulated and work smoothly then it is an indicator of healthy capital market. If the state of the Stock Exchange is good and overall capital market will grow and otherwise it can suffer a great set back which is not good for the country. Government at various stages controls the stock market and capital market. The importance of Stock Exchange is as follows: -

Providing regular market to the securities.

Encouraging investment habits in general public.

Providing liquidity to the securities.

Providing a mechanism for continuous evaluation of the securities.

Encouraging capital formation.

Acting as an intermediary between buyers and sellers.

Providing stability in the prices of securities.

Publishing regularly stock price quotation.

Providing facility of a trading hall for the members transact business.

Protecting the interest of the investors.

Providing a better platform for investors to invest their valuable money.

Making the transaction more convenient for both, the buyers and sellers.

Origin and Development of Stock Exchange

The first Stock Exchange was established in London in 1773, and then the trend of Stock Exchange goes on. Later on many other countries like France, Germany, USA and India etc followed the culture of stock exchange. In India the first stock exchange was established in Bombay in1875. After the establishment of first stock exchange many more stock exchange came into existence. So far government of India has recognized 23 Stock Exchanges in the country.

After the establishment of various Stock Exchanges in India, there was a need for such organization, which can control the operations of the stock exchanges. Then government of India introduced SEBI Act, 1992, under this act SEBI (Securities and Exchange Board of India) came into existence. Now SEBI is there, to protect the interest of investors in securities market, to monitor and regulate the working of the Stock Exchanges. SEBI took care of the development of these Stock Exchanges also.

Securities market

Securities market is the market, where activities related to shares, debentures. Preference shares, bonds, etc. are dealt. These provide the market place where buying and selling of securities and shares are done. There are two type of securities market, these are: -

Primary market

Primary market deals with new securities that are securities, which were not previously available and are offered for investing to the public. It is the market for raising fresh capital in the form of shares and debentures. It provides the issuing company with additional funds for starting a new enterprise or for either expansion or diversification of an existing one, and thus its contribution to company financing is direct. The new offerings by the companies are made either as an initial public offering ( IPO) or right issue.

Secondary market

Secondary market is the market for buying and selling securities of the existing companies. Under, these securities are traded after being initially offered to the public in the primary market and listed on the stock exchange. The stock exchanges are the exclusive centers for trading of securities. It is a sensitive barometer that reflects the trends in the economy through fluctuation in the prices of various securities. It can be define as, a body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating and controlling the business of buying, selling and dealing in securities. SEBI has issued various guidelines for the operations of secondary market.

The secondary market operates through two mediums, namely, the over-the-counter (OTC) market and the exchange-traded market. OTC markets are informal markets where trades are negotiated. Most of the trades in the government securities are in the OTC market. All the spot trades where securities are traded for immediate delivery and payment take place in the OTC market. The other option is to trade using the infrastructure provided by the stock exchanges. The exchanges in India follow a systematic settlement period. All the trades taking place over a trading cycle (day=T) are settled together after a certain time (T+2 day). The trades executed on exchanges are cleared and settled by a clearing corporation. The clearing corporation acts as a counter party and guarantees settlement. A variant of the secondary market is the forward market, where securities are traded for future delivery and payment. A variant of the forward market is Futures and Options market. Presently only two exchanges viz., National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange (BSE) provide trading in the Futures & Options.

Trading

Trading is the transaction held between the buyer and seller of the securities. In the process of trading people buy and sell securities and this buying and selling is done through the members of the stock exchange.

These members are called brokers and they perform the task to intermediate between buyer and seller for the brokerage. There are two types of trading, these are: -

Online share trading

Realizing there is untapped market of investors who want to be able to execute their own trades when it suits them, brokers have taken their trading rooms to the Internet known as online brokers, they allow you to buy and sell shares via Internet.

Investors can have complete control of their stock investing actions, now that they have the convenience of buying and selling shares on the NSE online and in real time. Each individual has access to the latest information and tools to analyze any stock investment decision and the power to execute the sale or purchase right before them on their personal computer screen.

Margin trading

Margin Trading is nothing but borrowing money to invest in stocks, here the investor borrows money from his/her broker to invest in stocks through the same broker. The margin here is the money actually borrowed from the broker. The margin loan can be up to 50% of the total amount invested. This effectively means that you can invest in shares worth Rs 100 by borrowing Rs 50 from your broker. This is called buying shares on a 50% margin. If the value of the shares goes down, the investor has to pay a maintenance margin to bring the margin up to 40% of the market value of the shares. This margin is paid when the broker makes a margin call to the investor, and investor has to pay the difference between current margin and maintenance margin to take it to 40%. If the margin falls below 30%, the broker has the discretion of liquidating the clients holdings and thus recovering the loan advanced.

Introduction of depository

At the start of selling and buying of the securities, there were limited transactions. The numbers of transaction was so small that it was easily handled in the physical form. But as this securities market get popularize, the numbers of transactions increased, there was rapid growth in the securities market, it became quite hard to handle all the transactions in physical/ paper mode. There were lots of problems with physical form of shares for example these problems were: -bad deliveries, delays in transfer and irregular settlement. Then because of these many problems the electronic mode of securities came into existence. There were two ways to ignore all the problems related to physical form of shares, these were: -

1. Immobilization

In this securities are held in the physical form but transfer is done electronically or we can say through book entries only.

2. Dematerialization

In this share certificates are destroyed once and then they are admitted to the depository and the credit against this is credited in the account, which is maintained electronically. India has opted for the dematerialization route which is better option given the large amount of paper work involved.

This electronic medium of trading was firstly introduced by national stock exchange (NSE) followed by the Stock Exchange, Mumbai (BSE) in 1995 inducted efficiency in trading system but physical mode of delivery continued to be a drag. Depository system provided for dematerialization of securities, custody and trading in electronic book entry form became the unavoidable answer to the capital market plagued by ills. The government of India promulgated Depositories Ordinance in September 1995, which was replaced by the Depository Act, 1996.

The depository act

The depositories act, 1996 changed the capital market entirely. It makes the capital market more efficient by providing it a improved infrastructure, improved investor protection in the securities market. With the introduction of this depository act not only investors are benefited but all the issuer companies are also benefited, like they enjoy less cost in issuing electronic shares than issuing physical shares and it is easy for them to manage all its shareholders if they have securities in electronic form. So this depository act is beneficial for all for issuer, investor and intermediary.

This depository act helps in removing irregularities, bad deliveries, odd lots etc., now the tradable lot is reduced to one unit of share. It also protects the interest of the investors. This helps financial market also by making all the things in a particular order. Now because of depository act, there is free transferability of securities with speed, accuracy, transparency etc.

Depository

A depository is an organization where the securities of a shareholder are held in electronic form at the request of the shareholder through a medium. This medium is called depository participant (DP).

Presently in India, there are two depositories, these are: -

1. National Securities Depository Limited, (NSDL)

2. Central Depository Services (India) Limited (CDSL)

These two types of Depositories work under Depositories Act, 1996. They hold the securities of investors in the electronic mode.

Depository has many salient features. These features are: -

Investors has option to join the depository

In this act it is not a compulsion that every investor have to retain all securities only in dematerialized form. This all depend on the wish of investor that weather he want to keep his securities in dematerialized form or in physical form. He have the option that he can some part of shares in dematerialized form and rest in physical form.

Dematerialized holdings are fungible

According to this if once securities are dematerialized, they will not have any unique characteristics such as distinctive numbers, folio numbers, etc. These holdings of a particular security will be identical to each other and interchangeable.

No stamp duty

It is mentioned that if the securities will be in dematerialized form then it will be exempted from stamp duty that is 0.5% for physical shares.

Customers can interact through participants

According to this feature, the depository will not directly communicate to shareholders, there will be an intermediary between them. With the help of this intermediary only the investor will be able to take the benefit from depository. These intermediaries are depository participants (DP). There are two types of depositories; customer can choose any of them on the basis of the services offered by these depositories.

Dematerialization as the only way for depositories in India

There are two ways for investors to be attached with depositories. But India had chosen the way of dematerialization. In India if investors wants to take the facilities of depositories then they have to dematerialize their securities.

Need of depository

Need of depository can be understood by looking at the scenario of securities market before and after depository act, 1996.

Traditional system of physical share certificates

The Indian capital market has seen an unprecedented boom in its activity in the last decade. We can now boast of a very large investor population and substantial volumes of trade. However, this surge in activity has brought with it, numerous problems that threaten the survival of the capital market in the long run. A closer inspection of the problems would reveal that most of them arise due to the intrinsic nature of paper based trading and settlement.

This century-old system of trading and settlement requires handling of huge volumes of paper leading to increased costs and inefficiencies. Simultaneously, they export the investors to greater risks. Some of these are:

Unwanted delay in transfer of shares. It takes 30-60 days for the investors to get the shares lodged in their name.

Theft of shares leading to defective title in shares purchased and subsequent litigation.

Possibility of forgery on various documents leading to bad deliveries, legal disputes etc.

Prevalence of fake certificates in the market;

This has made the investors, both retail and institutional, disturbed of entering the Indian Capital Market. In this scenario, it was felt that the setting up of a depository and the introduction of scrip-less trading and settlement is imperative for the efficient functioning of the market.

Benefits of scrip-less trading and settlement:

In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the Capital Market of the dangers related to handling of paper. That is not all; the depository provides numerous other direct and indirect benefits like: -

Elimination of bad deliveries and all risks associated with physical certificates, such as loss, theft, mutilation, etc.

Reduction in handling of huge volumes of paper.

No stamp duty for transfer of equity instruments and units of mutual funds in the depository (in case of physical shares, stamp duty of 0.5% is payable on transfer of shares).

Immediate transfer and registration of securities, increasing liquidity of stocks with the investor.

Pay in and pay out of securities and funds is on the same day for scrip-less trades.

Faster settlement cycle.

Faster disbursement of Corporate Benefits like rights, bonus, etc.

Reduction in rate of interest on loans granted against pledge of dematerialized securities by many banks.

Reduction in brokerage by many brokers for trading in dematerialized securities.

Periodic status reports to investors on their holding and transactions, leading to better control.

Substantial reduction in transaction cost in dematerialized securities as compared to physical securities.

This makes pledging of securities /shares more easier than physical form of shares.

It enables quick ownership of securities on settlement resulting in increased liquidity.

It avoids confusion in the ownership title of securities & provides easy receipt of public issue allotment.

It avoids risk associated with forgery, counterfeiting, and loss due to fire and loss because of theft.

It avoids inconvenience related to filling the transfer deeds again and again.

It makes the faster payment on sale of shares.

There is no risk of buying fraudulent share certificates.

These were the benefits that securities market is enjoying because of depository system. And rest of the benefits can be understood through this table: -

Comparison of cost physical v/s dematerialized form of sharesTypes of accountPhysical sharesDematerialized sharesBrokerage

0.75% 1.25%

0.25%

Stamp duty on transfer

0.5% of market value

Nil

Postal charges

Actual

Nil

Transfer deed

INR 0.35% TD

Nil

Follow ups

Actual

Nil

Settlement charges

Nil

.05% of transaction value

Custody charges

Actual cost

0.02% of share value

Bad delivery

Not quantifiable

Nil

Loss/theft

Actual

Nil

Non receipt of bonus/right shares

Actual

Nil

From this table we can easily figure out the benefits of dematerialization of shares. Now just because of inconvenience from physical form and benefits from dematerialized form of shares, SEBI has instructed that transaction of more then 500 shares will be done only if the shares are in dematerialized form. And some of the have also took initiative to issue their new offering only in dematerialized form of shares.

Like in January when reliance powers IPO came then it was allotted only in dematerialized form in demat accounts. Such types of compulsion, makes the investors to open their demat accounts.

Participants in depository system

This depository system does not work alone; there are many participants of this depository system. These participants may provide work to depository or may perform work on behalf of depository or may perform task, which will facilitate the Indian depository system. These participants of depository system are: -

Issuer or company

Issuer is a company, which issues share/ securities for raising fund from market. Whenever a company requires funds for its operation, it has option to ask funds from public by issuing shares, debentures, bonds, preferential shares, etc.

Issuer registrar

Many times company appoint registrar to handle all the disputes related to issue of shares or IPOs. These registrar work on behalf of the company and manage all the things related to shares/ securities of the company.

Depository participant (DP)

A DP is a market intermediary, which interacts with customers on behalf of depository. For obtaining the services provided by DP customers firstly are required to open a demat account with it, then only they can avail the services of a DP.

Investor

Investors are the people who invest in securities or who buys shares from securities market. These investor purchases the securities for making profit out of it.

Stock brokers

Stockbrokers are the market intermediaries who intermediate the transaction of buying and selling among different people. With the help of these peoples two people who dont know each other can sell and purchase securities. They work for brokerage.

Clearing members

Clearing members (CMs) are the members of the clearinghouse or clearing corporation who facilitates settlement of trades done on stock exchanges. They could be a broker or custodian registered with SEBI as such is an important intermediary in the capital market and an essential link in the depository system. The various categories of CMs are: -

1. Trading member

2. Custodian

3. Subsidiary companies by regional stock exchanges to facilitate their members to trade on BSE/NSE.

Clearing corporation

Clearing corporation are called clearing house also. These are the organization, which facilitate the settlement of trades. These are very important part of trading system.

The relationships among all these participants of the depository system can be understand by looking at this chart.

Introduction of CDSL as a depository

A depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a depository participant (DP), who is an agent of the depository, it offers depository services to investors. As there are two depositories in India, NSDL & CDSL.

CDSL (Central Depository of Securities Limited) is a depository in India to facilitate the Indian securities market. Earlier there was only one depository called NSDL, but when the volume of the transactions in the securities market increase, then CDSL came into existence to serve the investors in the securities market. CDSL received approval from SEBI in February 1999. This was promoted by the Stock Exchange, Mumbai (BSE) jointly with leading banks such as State Bank Of India, Bank Of India, Bank Of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank Of India and Centurion Bank. CDSL commenced its operations from July 1999. It has depository participant all over India.

There are some milestones in the journey of CDSL. These milestones are: -

1. CDSL received the certificate of commencement of business from SEBI in February 1999.

2. Honorable union finance minister, Shri Yashwant Sinha flagged off the operations of CDSL on July 15,1999.

3. All leading stock exchange like the NSE, Calcutta Stock Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have established connectivity with CDSL.

4. Till December 2007, over 5000 issuers have admitted their securities certificates of deposits etc. into CDSL system.

Benefits to be attached with CDSL

There are many benefits to accountholders, DPs, issuer companies to be attached with CDSL. Some of these benefits are mentioned below: -

CDSL provides wide network of DPs. It is connected with 375 DPs spread across 124 cities in India, so investors have wide option to choose their DP as per their convenience.

All the DPs are directly connected to CDSL, This provide on-line and efficient depository service to investors.

There is wide variety of securities admitted with CDSL for demat purpose. There are 5500 issuer companies admitted with CDSL, thus an investor can hold almost all his securities in one demat account.

CDSL has kept its tariffs vary competitive to provide affordable depository services to investors.

CDSLs system is built on centralized database architecture and thus enables DPs to provide on-line depository services with the latest status of the investors account.

CDSL has made provisions for contingency terminals, which enables a DP to update transactions, in case of any system related problems at the DPs office.

CDSL provide security by providing unique BO account number and it has the facility of insurance cover in the unlikely event of loss to a BO due to the negligence of CDSL or its DPs.

Objectives of CDSL

CDSL has some objectives, which it took in consideration at the time of its establishment. These objectives are: -

1. It wants to accelerate the growth of scrip less trading.

2. It wants to make the trust of its individual investors in CDSL.

3. It wants to create a competitive environment and wants to be responsive to users interest and demands.

4. It wants to enhance liquidity.

Central depository accounting system (CDAS)

CDSL has one depository software, which is called CDAS. This software is developed and supported by CMC Ltd. CDAS is equipped with centralized database architecture. This implies that CDSL, centrally performs the major activities such as processing, storing and maintenance of data and its backup, not only at CDSLs main site of operation, but also at the disaster recovery site (DRS) situated at a remote location. This develops a safety net such that the users may devote their entire concentration in business.

Hardware

Hewlett Packard, a company, provides the hardware RP 8400 bundled with main features available in mainframe computers. It is capable of handling 16 numbers of CPUs with 1,00,000 TPMC. RP 8400 has maximum 64 GB memory with advance ECC protection.

Database architecture

CDSL system has centralized database architecture. As the term suggests, the architecture involves the storage and updating of records at single location at CDSLs main site of operation. There is no separate database at the users site of operations. All transactions by users from anywhere in the country are updated the moment they are committed, requiring no reconciliation between CDSL records and the records of users, since there is effectively only a single database. Moreover, credit of securities arising from demat confirmation, corporate actions and transfers are available instantaneously for further processing.

Front end

Front end is the user interface for a DP/RTA to access various features of CDAS and to conduct all daily operations. This pat of the software is installed in users office. Hardware required to install this component will typically be a Pentium based system with windows operating system and is referred as workstation. From this feature only the DPs can make changes in demat accounts anytime.

Back end

Back end can also be called HOST. It is a component of system, installed at CDSLs premises, which process and store all data related to depository and is accessed by user through front end. This part of the system is installed on RP 8400 system.

Communication channel

Communication gateway system (CGS) provides a link between front end and back end to allow the file transfer and data flow.

Disaster recovery system

CDSL has in place, a robust system with multiple back-up levels including a redundant fail-over cluster and a DRS, which has achieved disaster-ready connectivity status. Consequently, in the event of a disaster at the main site, users connected to the CDSL because of disaster recovery site. DP, clearing corporations and registrar & transfer agents (RTAs) can electronically connect to the DRS for carrying on day-to-day operations. CDSLs disaster recovery site is situated at remote location. This is housed in ultra modern facilities and has the following features: -

Vibration-proof, foolproof from EMI/RFI interface, flooding and environmental pollution, tightly sealed and thermally insulated.

Three layers of power supply: main feeders from MSEB, dual DG sets, Dual UPS and dual electricity distribution system.

Precisely controlled environment for humidity, ventilation and air-conditioning.

High sensitivity smoke detection system.

Centralized operations from building management system.

Multiple layers of physical security.

Stringent fire detection and protection norms.

CDAS Application

To start CDAS, the user has to first establish communication with the HOST. Clicking on communication Gateway server (CGS) icon of transmission tower does this. A screen is shown on the adjacent page.

Upper part of the screen contains technical details. For normal users the most important display is STATUS-ONLINE displayed at the bottom of the window. Minimize the screen after checking the status. CGS should be ON as long as the user wants to work.

Next step is to click on spaceship icon labeled as MASTER present on the screen to start main CDAS application. This action will display the login window.

For security purpose, each user is provided a user identification number referred as LOGIN ID and a user definable password .To access CDAS, the user has to enter his Login ID and password in the space provided and click on OK button.

CDSL upgrades the CDAS system as and when new functionality is introduced or existing functions are modified to suit user requirements or to meet SEBI guidelines. Whenever such new version is available, the system will flash a version change message during login phase.

It is not mandatory to download the new version immediately, but it is always advisable to do it. To apply release for new version, close Master application as well as CGS applications and click on Release icon to download new version.

After login procedure is completed, the system displays the main screen of the CDAS application for DP. Main screen of the CDAS application for RTA has a menu bar at the top of the window, which has options namely File, Applications, Information, SOD /EOD time and Help.

At the bottom of the window a status bar is displayed which shows following information:

Status of the workstation and Host, whether online or offline.

Day, Date and time .The date displayed is the business date.

On extreme right hand corner of the status bar three characters C R S will be displayed.

C - Indicates communication gateway status

R -Indicates workstation registration status

S Indicates users sign on status.

Between menu bar and status bar various application icons will be displayed. A short explanation of these icons is given below.

Function of CDAS for a DP

Beneficiary owner module

This module allows a DP to set up accounts for various categories of investors various details like names and address of the BO, additional details of the BOs signatures and power of attorney can be stored in the system. User can also provides facility for closing an account.

Dematerialization

This module allows DP to set-up, modify or delete demat requests and monitor their status.

Rematerialization

This module allows DP to set-up, modify or delete remat requests and monitor their status.

Transfer and transmission

This module is used only in the event of death of an A/C holder. The balance can be moved in two ways.

1. One to many (ISIN wise)

2. One to one (All ISINs)

Off market

Off market trades result when securities are transferred between two accounts already maintained with CDSL DPs.

Interdepository

This module is used to transfer /receive the securities from an account in CDSL to/from any other account of the other depository.

Settlement

Through this module, the DP can enter ON-market instructions for delivering the securities for respective settlements, for which the BO/CM has traded on the exchange. Facility for early pay-in is also provided in this module

BO upload

The DP can capture the details of the intending BOs in his back office software and then upload the files through this option for setting up BO accounts in CDSL.

Upload

Similar to BO upload, this module allows a DP to upload files for transactions such as Demat, off market, Inter depository, Settlements, Early pay in etc

Pledge and unpledge

The DP can set up, modify, delete, accept or reject the pledge request for his BO. Unpledge or invocation of the same can also be done through this module.

Corporate action

This module facilitates DPs to inquire the details of corporate actions set up by issuer / RTA

Initial public offer (IPO)

This module facilitates DPs to inquire the details of initial public offers set up by issuers /RTA

Special services of CDSL

There are three types of services, which are for the benefit of the investors. These services facilitate customers in many terms. These services are: -

Easi

Electronic access to securities information (easi) is CDSLs internet facility, which enables beneficial owners/clearing members having demat account with CDSL system to view their holdings and obtain transactions status through the internet easi is accessible anywhere-anytime through CDSLs website- www.cdslindia.com

Facilities offered by easi:

Any BO (Beneficiary Owner) who has an account with a DP of CDSL and whose DP has registered under easi can avail of the easi facility. All that is required is a computer with Internet access. A BO (Beneficiary Owner) can use easi for:

1. Viewing his holdings.

2. Viewing the status of his instructions.

3. Obtaining transaction details for preceding 7 days.

4. Viewing the value of his holdings based on the previous days closing price on BSE.

5. Obtaining print of statement of account.

Easiest

Easiest is an Internet facility which permits Bos and CMs to submit debit and credit transaction instruction to effect off-market, on-market, inter-depository and early pay-in transactions. Moreover, all the facilities and benefits of easi are automatically available to a subscriber of easiest. There are two options available on easiest:

1. Trusted account transfer- trusted accounts are settlement accounts of clients broker. A BO can specify up to four settlements accounts.

2. Account of choice transfers- in the account of choice option, transfer of securities will be permitted to any demat account.

Smart

Smart is a SMS alert facility to BOs. In this facility BO will get a message from CDSL whenever there will be any transaction related to his account. At every debit and credit he will receive a message. A BO can obtain this facility after applying for by filling a form. This form for application can be obtained from DP itself.

Depository participant

Up till now it is very much clear that depository works as an organization like a central bank where securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of depository participant (DP). So DP is a very important organization in the present scenario of securities market.

Similar to the broker who trade on behalf of client in and outside the stock exchange, a depository participant is representative or agent of its clients in the depository system. The depository participant is there to maintain the balance of securities in demat account & provide the status of holdings to its clients on a timely basis. According to the guidelines of SEBI financial institutions like bank, custodian, stockbrokers etc. can become participant in the depository. If we want to avail the services of a depository and depository then we have to open a demat account with a DP to deal in electronic securities. We can say if depository can be called a bank then DP can be called a branch of bank, through which we can be connected with depository.

Services provided by DP

DP is there to serve its clients in many ways. DP is responsible to handle the securities in the electronic form in the accounts of BOs and apart of that it provide many other services or facilitate its clients in many ways. Here are the services provided by DP to its clients: -

Demat account opening and maintenance

An individual who want to keep his /her cash safe in a bank has to open an account with the bank as a first step and maintain cash in book entry form. Similarly, an investor has to open an demat account with any DP of CDSL as a first step to hold securities in Demat form in the Depository system .The investor can open an account with nay DP of CDSL. CDSL system facilities opening of demat accounts for different categories of investors.

Demat accounts opened with CDSL are referred as Beneficial Owner Accounts or BO account. As explained earlier, when securities are held in physical form name of the investor is recorded in the books of the company as Registered owner. When the same securities are converted into electronic form and held in a demat account, the depository becomes registered owner of the securities. Since depository is acting as a custodian of the securities, original investor is legally entitled for all rights / liabilities attached with securities and hence are called a Beneficial Owner. All accounts opened on CDSL system are beneficial accounts irrespective of the type of account.

A Demat account may be opened and maintained in the name of one person or more then one persons (joint holders). All the joint holders have to sign the application form and the agreement .The supporting documents and photographs should also be provided for all joint holders. Though the beneficial ownership of the jointly held securities Rests equally in all joint holders, communication about the joint depository account are provided only to the first holder. The dividend and interest warrants, annual reports and notice for meetings are also issued to the first named joint holder only.

All BO accounts are operated at DP level; however, data is maintained at CDSL level. A BO does not have direct access to CDSL system and must act through His/her DP. While opening an account, the BO can give a standing instruction (confirmation waiver of purchase waiver) to allow credits automatically to the account without separate instructions.

Account opening procedure

There is a pre-decided account opening procedure, this procedure is presented below: -

1. The person who wants to open a demat account is required to submit duly filled account opening form along with necessary documents.

2. DP will verify signatures and all the documents presented.

3. The DP will capture details from the account opening form filled by the BO in the front-end system provided by CDSL. While putting the details into the system it is required to be very careful at least at the time of entering name of BO because all other details can be modify further but the BO name will enter once, will remain forever till the account is operating. The DP will scan the signatures of the BO as well as the power of attorney signatures, if applicable. Once, the DP commits the transaction, the data is captured and stored at CDSL.

4. A unique BO account number is generated by the system and this can be seen at the DP front-end system. This will be done on-line and the information gets transmitted to CDSL instantaneously .The DP will record the BO ID on the original application form and on the DP-BO agreement for cross-reference.

5. On committing the BO details in the front-end, system will generate a confirmation letter, which includes all the necessary information regarding BO. This letter is called client master.

6. Then DP will send this letter to the concerned client.

7. DP will issue a delivery instruction book for account holder.

Documents required

There are the documents, which are required to submit with the account opening form.

Individual investor

1. PAN card as identity proof.

2. Address proof (Ration card, Bank pass book, electricity bills, landline bills latest of 2 months, voter I.D card, driving license, etc.)

3. Bank proof with all the required bank details like name of bank, MICR code, account number, account type and branch name.( pass book, canceled cheque with printed name, bank statement of latest 6 months, etc)

4. Stamp paper

5. One passport size photograph, it should be signed.

Additional documents for HUF

1. HUF declaration certificate,

2. PAN card of HUF.

Additional documents for MINOR

1. Certificate of guardian declaration if the guardian is not one from the natural guardian.

Documents for corporate investors

1. Certified true copy of board resolution for persons authorized by the board to act as authorized signatories.

2. Name of the authorized signatories, designation, and their specimen signatures.

3. POA given to the authorized signatories.

4. Memorandum and article of association.

5. One passport size photograph of each authorized signatories with their signatures across the face of the photograph.

Additional information

At most three holders can open a joint account.

One time standing instruction for credits to DP.

HUF account holder cannot nominate any body.

Only individual can appoint nominee and nominee can be an individual only.

Account cannot be open in the name of partnership firm.

Modification in demat account

If in future a BO wants to change some of his details then it can be done through modification function of MASTER application.

1. BO will submit a duly filled modification form along with required proof for that.

2. DP will verify the information.

3. DP will put the information in modify option of BO obligation.

4. System will generate an acknowledgement.

Name of the BO and BO status cannot be changed, for the change of name the existing account will be closed and new account will be opened.

Closure of demat account

Account closure can be initiated by any of them: BO, DP or CDSL. The account can be closed by CDAS system only when all the balance in the accounts is reduced to zero. There should be no holding in the account and all the AMC charges should be paid, and no due should be there. And the form should also specify that whether the balances in the BO account be rematerialized or transferred to another BO account of CDSL.

Procedure

Closure initiated by BO himself

1. BO will submit a duly filled account closure request form to DP.

2. On receiving the form, DP will verify the details available in the CDSL system and will see if there is any balance left to be paid.

3. If DP will find everything correct then it will execute the closure request.

Closure initiated by DP

DP has right to close the account of BO, if there is any problem with that account. The account closing reason can be anyone of them: -

1. Mistake in entering BO details in the system.

2. Non-payment of fees and other charges.

3. Submission of fake/ forge/ stolen documents for dematerialization.

4. Commission of fraud.

5. Non-compliance with any clauses in the DP-BO agreement.

6. Any other reason which CDSL think invalid.

The procedure of account closure is following: -

1. DP will give a notice regarding the closure of account before a specified period decided by CDSL.

2. DP will enter account-closing request in to CDAS system.

3. The request will approve internally in DP office through CDAS.

4. CDSL will approve the request initiated by DP if the reasons are satisfactory.

5. Finally account will be closed.

Closure initiated by CDSL

CDSL may direct the closure of a BO account under specific circumstances such as order of a competent court or tribunal, or an order of the central or state Govt., or SEBI or that of any other competent authority or if CDSL otherwise feels it not to be in the interest of CDSL, DPs and the BOs.

Benefits of having a demat account

For holding securities in dematerialized form it is mandatory to have a demat account with any DP of any Depository. Having a demat account is beneficial in many terms. Here are some of the benefits or advantages of demat account presented below: -

SEBI had made it compulsory for most of the scrip to be traded only in demat segment. There are many companies, whose scrips can be traded only in demat segment, so to trade in those securities it is required to have demat account.

Demat account holder may enjoy reduced cost in term of transaction as transaction in demat mode of securities is exempted from the stamp duty that is 0.5% in case of transaction in physical mode of shares.

A demat account holder will be free from all the risks associated with physical form of securities like delays, theft, mutilation, bad deliveries etc.

A demat account have an option also to have its securities in frozen mode his demat account.

A demat account holder is free from the problem of odd lot of securities, that exist in physical mode of securities, in demat mode of securities, market lot is reduced to one.

It is beneficial to have demat account because dematerialized securities are most preferred by banks and other financiers for providing credit facility against securities. Generally, demat securities attract lower margin and lower