The Hindu Business Line : How to trade in demat mode

In order to dematerialise physical securities one has to fill in a demat request form (DRF), which is available with the depository participant and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialisation is outlined below:

Surrender certificates for dematerialisation to your depository participant.

Depository participant intimates Depository of the request through the system.

Depository participant submits the certificates to the registrar of the issuer company.

Registrar confirms the dematerialisation request from depository.

After dematerialising the certificates, the Registrar updates accounts and informs depository of the completion of dematerialisation.

Depository updates its accounts and informs the depository participant.

Depository participant updates the demat account of the investor.

What is an ISIN?

ISIN (International Securities Identification Number) is a unique identification number for a security.

Can odd lot shares be dematerialised?

Yes, odd lot share certificates can also be dematerialised.

Do dematerialised shares have distinctive numbers?

Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable.

What is the procedure for selling dematerialised securities?

The procedure for buying and selling dematerialised securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities.

In case of purchase:-

The broker will receive the securities in his account on the payout day.

The broker will give instruction to its DP to debit his account and credit investor's account.

Investor will give `Receipt Instruction to DP for receiving credit by filling appropriate form.

However, one can give standing instruction for credit into ones account that will obviate the need of giving receipt instruction every time.

In case of sale:-

The investor will give delivery instruction to DP to debit his account and credit the broker's account. Such instruction should reach the DP's office at least 24 hours before the pay-in as otherwise DP will accept the instruction only at the investor's risk.

What is `Standing Instruction' given in the account opening form?

In a bank account, credit to the account is given only when a `pay in' slip is submitted together with cash/cheque.

Similarly, in a depository account `receipt in' form has to be submitted to receive securities in the account.

However, for the convenience of investors, the facility of `standing instruction' is given. If you say `yes' for standing instruction, you need not submit `receipt in' slip every time you buy securities.

If you are particular that securities can be credited to your account only with your consent, then do not say `yes' (or tick) to standing instruction in the application form.

What is delivery instruction slip (DIS)? What precautions do one need to observe with respect to DIS?

To give the delivery one has to fill a form called delivery instruction slip. DIS may be compared to a cheque-book of a bank account. The following precautions are to be taken in respect of DIS:-

Ensure and insist with DP to issue DIS book.

Ensure that DIS numbers are pre-printed and DP takes acknowledgment for the DIS booklet issued to investor.

Ensure that your account number (client id) is pre-stamped.

If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed.

Avoid using loose slips

Do not leave signed blank DIS with anyone viz., broker/sub-broker.

Keep the DIS book under lock and key when not in use.

If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one.

Investor should personally fill in target account - ID and all details in the DIS.

Is it possible to give delivery instructions to the DP over Internet and if yes, how?

Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively.

The facility can be used by all registered users after paying the applicable charges.

www.sebi.gov.in