Legal Requirement, Operation of Clearing and Settlement
Trading options available in stock exchanges
At present, the facility of trading and settlement in dematerialised shares is available in The Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Bangalore Stock Exchange (bgse), The Calcutta Stock Exchange Ltd (CSE), The Delhi Stock Exchange Association Ltd (DSE), Ludhiana Stock Exchange (LSE) and the Over the Counter Exchange of India (OTCEI).
These Stock Exchanges have distinct trading segments viz. The unified (physical) and Depository (dematerialised). In the unified segment, investor has the option of delivering Physical or dematerialised shares. However, with effect from 4th January, 1999 shares Included in the list of select list of companies (including of RELIANCE ENERGY) can be delivered only in the dematerialised form in all stock exchanges linked to NSDL.
The Other stock exchanges, at present, have only the physical segment. However, in times to Come, other stock exchanges too may be providing depository segments. The settlement of trades done in the exclusive dematerialised segments at BSE, DSE, NSE, bgse, CSE, DSE and OTCEI follow the rolling settlement concept, where trade Done on each day is settled after a fixed number of days. Right now, the dematerialized Segments follow T+5 rolling settlement, which means that trades are settled on the fifth Working day from the date of the trade.
Process for selling dematerialised shares
The procedure for selling dematerialised shares in stock exchanges is similar to the Procedure for selling physical shares. In this case, instead of delivering physical shares to The broker, you instruct your DP to debit your account with the number of shares sold by You and credit your broker’s clearing account. This delivery instruction has to be given to Your DP in a standardised form, which will be available with your DP. The transactions
Relating to sale of shares is summarised under:
* Investor sells shares in any of the stock exchanges linked to NSDL through a Broker.
* Investor gives instruction to his DP for debit of his account and credit of his Broker’s CM Pool account.
* On the pay-in day, Investor’s broker gives instructions to his DP for delivery to Clearing corporation of NSE, BSE,CSE, bgse, OTCEI, LSE or DSE as the case May be.
* A broker receives payment from clearing corporation.
* Investor receives payment from the broker for the sale as in the physical mode.
How can I purchase dematerialised shares?
The procedure for buying dematerialised shares in stock exchanges is similar to the Procedure for buying physical shares. When you want to purchase shares in electronic Form, you have to instruct your broker to purchase the dematerialised shares from the Stock exchanges linked to NSDL. Once your order is executed, you have to give your DP An instruction (in a simple form which is available with your DP) to receive securities into
Your account from your broker’s depository (clearing) account. Alternatively, you may give One time standing instruction to receive credits into your account (this facility will be shortly available). You have to ensure that your broker too gives a matching instruction to His DP to transfer the shares purchased on your behalf into your account. The investor should also ensure that the broker transfers the shares purchased from the clearing Account of the broker to the investor’s depository account. Shares that remain in the
Clearing account of the broker on the book closure / record date will not be eligible for corporate benefits.
The transactions relating to purchase of shares are summarised below:
* Investor purchases shares in any of the stock exchanges linked to NSDL through A broker.
* Broker arranges payment to clearing corporation (CC).
* Broker receives credit in his Pool Account with his DP on the pay-out day.
* Broker gives instructions to his DP to debit his account and credit his client’s Account.
* Investor gives instruction to his DP for receiving credit in his Investor account.
* If the instructions match, Investor’s account with his DP is credited.
* Investor makes payment to broker as in the physical mode.
Why should I, as an investor, prefer to buy dematerialised shares?
When you buy dematerialised shares, you become the owner of those shares as soon as They are credited into your account. This is unlike the physical market where it may take Anywhere between 2 to 3 months to get the shares transferred in your name. Further, the Possibility of loss or theft of share certificates is completely eliminated. As you do not have to send the share certificates to the company for transfer, you would Save on the postal / courier cost. This is in addition to the saving in stamp duty of 0.5% Which works out to Rs.50 for transfer of shares worth Rs.10,000.