Overview of Stock Broking, Dep, Cust

8/9/2019 Overview of Stock Broking, Dep, Cust

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STOCK BROKING SERVICES


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Broker

• A broker is an intermediary who arranges tobuy and sell securities on behalf of clients (thebuyer and the seller)

• According to Rule 2 (e) of SEBI (Stock Brokersand Sub-Brokers) Rules !""2 a stockbrokermeans a member of a recognized stock

exchange# $o stockbroker is allowed to buysell or deal in securities unless he or she holdsa certi%cate of registration granted by SEBI#


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BR&'ER-IE$*S REA*I&$S

Know your client

*he *+ shall enter into an agreement with the client, seek information like

in.estor risk /ro%le %nancial /ro%le in.estor

identi%cation details address details income 0A$em/loyment age in.estments other assets and%nancial liabilities#

Margins from the Clients

/rudent system of risk management

/rotect from client default# 0ayments1eli.ery of Securities to the lients 3

within one working day of /ayout

Brokerage - ma4imum brokerage chargeable is

%4ed at 2#56 of the contract /rice


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Sub-broker

Act as agents of the concerned tradingmember for assisting the in.estors inbuying selling or dealing in securities#

Re7uired to be registered with SEBI#

Allowed to be associated with only onetrading member of the E4change#


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&nline Stock *rading

An internet based stock trading facility#

In.estor can trade shares through awebsite without any manual inter.entionfrom Stock Broker#


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&ther ser.ices /ro.ided by brokers

0ortfolio +anagement ser.ices

In.estment ad.ice

Research re/orts and market .iews

+argin *rading


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+argin *rading

*rading with borrowed funds#

*aking e4/osure in the market o.er and

abo.e what is /ossible with own resources#

or/orate brokers with net worth of at leastRs#8 crore are eligible for /ro.iding +argin

trading facility

+ay use his own funds or borrow fromscheduled commercial banks or $B9s


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*he downside - if the stock /rice decreasessubstantial losses can mount 7uickly#

the stock you bought for Rs 5: falls to Rs 25

If you fully /aid for the stock you lose 5: /ercent of your money#

But if on margin you will lose !:: /er centand you still must come u/ with the interestyou owe on the loan#


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Regulation of stock brokers

*he SEBI (Stock Broker and Sub-Broker)Regulation !""2 lays down the rulesand regulation for registration of Stock

Broker and Sub-broker#


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E!OSITOR"SERVICES


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Earlier system

0hysical mo.ement of /a/ers#

*ransfer of ownershi/ 3 more than thetwo months

Bad deli.ery due to faulty com/lianceof /a/er work#

*heft forgery mutilation of certi%cates

*o ob.iate these /roblems thee/ositories Act !""= was /assed#


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e/ositories Act

It /ro.ides for the establishment of de/ositories insecurities with the ob>ecti.e of ensuring freetransferability of securities with s/eed accuracy andsecurity# It does so by (a) making securities of /ublic limited com/anies free#$

transferab#e (b) demateria#ising the securities in the de/ository

mode? and

(c) /ro.iding for maintenance of o%nershi& records ina book entry form#

*wo de/ositories .i@# $S and S ha.e come u/ to/ro.ide instantaneous electronic transfer of securities


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Eligibility riteria for a e/ository

'n$ of the fo##o%ing ma$ &romote a de&ositor$(

A /ublic %nancial Institution

A bank

A foreign bank o/erating in India with the a//ro.al of

the Reser.e Bank of India? A recognised stock e4change?

An institution engaged in /ro.iding %nancialser.ices where not less than ;56 of the e7uity is

held >ointly or se.erally by these institutions? A custodian of securities a//ro.ed by o.ernment

of India and

A foreign %nancial ser.ices institution a//ro.ed byo.ernment of India


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*he /romoters of a de/ository are also known as its

s&onsors#

A de/ository com/any must ha.e a minimum net

worth of Rs# !:: crore#

*he s/onsor(s) of the de/ository ha.e to hold at least

5!6 of the e7uity ca/ital of the de/ository com/any#

0artici/ants of that de/ository can hold the balanceof the e7uity ca/ital#

owe.er no single /artici/ant can hold at any /ointof time more than 56 of the e7uity ca/ital#


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9unctions of e/ository

ematerialisation

Account *ransfer

*ransfer and Registration 3 legal change ofownershi/

or/orate Actions

0ledge - *he securities /ledged are transferred to asegregated or collateral account through book entries inthe records of the de/ository#


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$S

$ational Securities e/ository imited - %rstde/ository in India (ecember !2 !""5)

Set u/ by IBI C*I $SE

$S commenced o/erations on $o.ember D!""=#

$S has a /aid u/ e7uity ca/ital of Rs# D:crore#

Its net worth is abo.e the Rs# !:: crore +anaged by a /rofessional Board of irectors

$S charges the 0s and not the in.estorsdirectly#

*he 0s in turn charge their clients


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Re.enue by $S from 0s

Entry fees 3 Rs 25:::

*ransaction related fees - Rs##5: /er debitinstruction in a lientFs account

0ledge fees - Rs#25 /er instruction for creationof /ledge

Remat charges

+inimum fee of ! lakh /er annum $o charge for demat and custody

Interest free security de/osit of !: lakhs


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Bene)ts of &artici&ation in ade&ositor$

Immediate transfer of securities

Elimination of risks associated with /hysicalcerti%cates such as bad deli.ery fake securitiesetc#

Reduction in /a/erwork in.ol.ed in transfer ofsecurities

Reduction in transaction cost

hange in address recorded with 0 gets registered

electronically with all com/anies so no need tocorres/ond with each diGerent com/aniesse/arately

Automatic credit into demat account of sharesarising out of s/lit1consolidation1merger etc#


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e&ositor$ !artici&ant

*he e/ository /ro.ides its ser.ices toin.estors through its agents calledde/ository /artici/ants (0s)

*hese agents are a//ointed with thea//ro.al of SEBI#

Banks 9inancial Institutions and SEBIregistered trading members can become0s#


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SEBI (e/ositories ,0artici/ants)Regulations !""= /rescribe a minimumnet worth of Rs# 5: lakh for the

a//licants who are stockbrokers or non-banking %nance com/anies ($B9s)

e/ositories can %4 a higher net worth

criterion for their 0s#

$S sti/ulates a minimum networth of

Rs# 8:: akh


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Re.enues of 0s

Account maintenance

emat

Remat

*ransaction (ebit)

0ledge reation


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C*STOI'+ SERVICES


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ustodian

A ustodian is an entity that hel/s registerand safeguard the securities of its clients#

Role 'ee/ing track of cor/orate actions on behalf of its

clients#

+aintaining the clientHs securities account

ollecting the bene%ts or rights accruing to theclient in res/ect of securities

'ee/ing the client informed of the actions takenor to be taken by the issuer of securities ha.inga bearing on the bene%ts or rights accruing to the

client#


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learing members of the clearing cor/oration#

Settle trades on behalf of the clients of thetrading members when a /articular trade isassigned to them for settlement#

*he custodian is re7uired to con%rm whether heis going to settle that trade or not#

If the custodian con%rms the trade $Sassigns the obligation to the custodian# If thecustodian re>ects the trade the obligation isassigned back to the trading member#


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+ake only 2-8 basis /oints on custody fees

+9s and 9IIs ha.e been increasingly looking tooutsource other administrati.e functions

*he SEBI guideline making it mandatory for/ortfolio managers with o.er Rs 5::-croreassets to a//oint a custodian is increasing thebusiness for custodians

$ewer client segments including high-networth indi.iduals increasingly understand theneed and .alue of engaging a custodian

0ost-itibank fraud $Is seek safety incustodian ser.ices


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Regulation of ustodians

ustodians are registered with SEBI underSEBI (ustodian of Securities regulations!""=)

+inimum networth re7uirement is Rs 5:crore

Registration fee of !5 lacs

Annual fee of !: lacs or :#::! /ercent ofassets under custody whiche.er is higher


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0artial ist of Registered ustodians

A4is Bank

iti

RBS

9 Bank

B$0 0aribas

eutsche Bank

Edelweiss

SB

III Bank

SBI

, ! -organ Chase S.CI+

Kotak -ahindra

I+/0S

SBI1SG

The dominant ones are Citi2 .SBC

and e3tsche Bank

Documents

Overview of Stock Broking, Dep, Cust