INTRODUCTION

Share khan is the retail broking arm of SSKI, an organization with more than eight decades of trust & credibility in the stock market. Business Leadership in: INSTITUTIONAL BROKING & INVESTMENT BANKING SSKI, a veteran equities solutions company with over 8 decades of experience in the Indian stock markets. Those who feel comfortable dealing with a human being and would rather visit a brick-and-mortar outlet than talk to a PC, would be glad to know that Sharekhan offers the facility to visit (or talk to) any of its share shops across the country. In fact Sharekhan runs India's largest chain of share shops with over hundred outlets in more than 80 cities! Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Share khans expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for its customers! To sum up, Sharekhan brings a user- friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares.Sharekhan is one of Indias leading broking houses providing a complete life-cycle of investment solutions in

EQUITIES, DERIVATIVES & COMMODITIES. If experience their language, presentation style, content or for that matter the online trading facility, one will find a common thread; one that helps you make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Share khans all about! Apart from Sharekhan, the SSKI Group also comprises of institutional broking and corporate finance. The institutional broking division caters to domestic and foreign institutional investors, while the corporate finance division focuses on niche areas such as infrastructure, telecom and media. SSKI has been voted as the Top Domestic Brokerage House in the research category, twice by Euro money survey and four times by Asia money survey.

SSKI CORPORATE STRUCTURE

SSKI Securities Pvt. Ltd.

Owns 56% of Owns 50.5% of

SSKI INVESTOR SERVICES PVT. LTD. SSKI CORPORATE FINANCE PVT. LTD. Retail broking arm of the group Investment Banking arm of the group Shareholding pattern: Shareholding pattern: 55.5% Morakhia family (promoters) 50.5% SSKI Securities Pvt. Ltd. 18.5% HSBC Private Equity India Fund Ltd 49.5 % Morakhia family 18.5% First Carlyle Ventures, Mauritius 7.5% Intel Pacific Inc.

THE SSKI LEGACY

Sharekhan is the retail broking arm of SSKI, an organization with more than eight decades of trust & credibility in the stock market.

Amongst pioneers of investment research in the Indian market In 1984 ventured into Institutional Broking & Corporate Finance. Leading domestic player in Indian institutional business Over US$ 5 billion of private equity deals.

SHAREKHANS SERVICES
1. ONLINE SERVICES a. Online Home b. First Step c. Classic Account d. Speed Trade e. Dial N Trade 2. SHARE SHOPS 3. MUTUAL FUNDS 4. COMMODITY FUTURES 5. PORTFOLIO MANAGEMENT SERVICES 6. TECHNICAL PORTFOLIO MANAGEMENT SERVICES 7. DEMAT SERVICES

ONLINE SERVICES
With a Sharekhan online trading account, one can buy and sell shares in an instant! Anytime one like and from anywhere he likes! One can choose the online trading account that suits your trading habits and preferences - the Classic Account for most investors and Speed trade for active day traders. Classic Account also comes with Dial-n-Trade completely free, which is an exclusive service for trading shares by using telephone.

Freedom from paperwork Instant credit and money transfer Trade from any net enabled PC After hour orders Online orders on the phone Timely advice and research reports Real-time Portfolio tracking Information and Price alerts

FIRST STEP
A unique program designed especially for those who have never invested in shares. Through First Step, Sharekhan informs and handholds one to become a stock market ka sher! The Sharekhan First Step is a brand new program designed especially for those who are new to investing in shares. All one has to do is open a Sharekhan FirstStep account and it'll guide one through the investing process.

Sharekhan as a guide
Been in the business for over 80 years, Sharekhan can provide one with the assistance and the advice like no one else could. It has created special information tools for its customers, to help answer any queries one may have. All one has to do is sign up to receive all the tools one need to understand the markets and invest in shares! From the right tools and right information at disposal to the host of services besides training, one can trust Sharekhan to be true guide to the financial jungle.

Why the FirstStep program?

In the complex world of investing in shares in India, interested beginners didn't have any place they could start out from. This is why sharekhan started the FirstStep program - to assist and guide new investors when they take their first steps into the world of investing in shares. This program is explicitly designed for beginners. One will not feel unintelligent when asking questions like "Who owns the Stock Market?" or "What is a stock-split?" since our people are trained to assist those taking their first step in the market.

 Invest using Rational Research

At Sharekhan we understand that every investor's needs and goals are different. Hence we provide a comprehensive set of research reports, so that you can the right investment decisions regardless of your investing preferences. You get

In-depth analysis of the markets Analysis Before, During (live market updates) and After market timings Special sector tracking reports sent regularly

Friendly Assistance at All Levels!

Soon after you sign up for the FirstStep program, we'll provide you (along with a group of other customers) a "Tutorial Session" at one of our Share Shops in your city. This tutorial will cover:

An introduction to investing in shares and fundamental concepts of the stock market

Using Sharekhan's online trading services and tools The exchange's settlement cycles for sending/receiving shares and money How to read our research reports and take investment decisions How to use our Dian-n-Trade services to execute trades and get investment advice

How to take assistance of our customer service team via phone, email and chat

Execution of First Order

Our sales executive will fix an appointment with the customers, and meet them to personally assist in placing an order either online or using Dial-n-Trade.

Dedicated Customer Support

Sharekhan has a team of trained professional executives ready to answer any queries one may have about products and services help him troubleshooting any problems one may experience and assist in every way possible. One can call customer service number (Toll-Free) for any kind of help related to executing transactions or payments and billing information.

CLASSIC ACCOUNT

Investing Online is so much easier!

This account enables you to buy and sell shares through website. Customers get features like a) Streaming quotes (using the applet-based system) b) Multiple watch lists c) Integrated Banking, demat and digital contracts d) Instant credit and transfer e) Real-time portfolio tracking with price alerts and, of course, the assurance of secure transactions.

Integration of: Online trading + Bank + Demat account Instant cash transfer facility against purchase & sale of shares

Make IPO bookings You get Instant order and trade confirmations by e-mail Streaming Quotes Personalized Market Scan with your own customized stock ticker! Single screen interface for cash and derivatives

System Requirements
One will need access to a computer, which has at least the following configuration:

Pentium 3 PC, Minimum 128 MB RAM Windows 2000/XP Internet Connection Internet Explorer 6.0 Java enabled in IE

APPLET-BASED TRADING ACCOUNT

Online trading account for investing in Equities & Derivatives via sharekhan.com
In addition to all the features of Classic Account, one can also get:

Streaming quotes.
Personalized market watch. Single screen interface for cash, derivatives and more. Provision to enter price trigger and view the same online in

market watch.

System Requirements
One will need access to a computer, which has at least the following configuration: Pentium 3 PC, Minimum 128 MB RAM Windows 2000/XP Internet Connection Internet Explorer 6.0

 Java enabled in IE

SPEED TRADE
The Power and Speed of a Broker's Terminal on your Desktop!
The ideal tool for active traders and jobbers who transact frequently during the day's trading session, Speedtrade enables you to capitalize on intra-day price movements. Speedtrade is an Internet-based executable application that provides everything a trader needs on ONE screen:

Instant order Execution & Confirmation Single screen trading terminal Real-time streaming quotes, tic-by-tic charts Market summary Hot keys similar to a brokers terminal Alerts and reminders Back-up facility to place trades on Direct Phone lines Single screen interface for cash and derivatives

System Requirements
One will need access to a computer, which has at least the following configuration:

Pentium 3 PC Minimum 128 MB RAM Windows 2000/XP Dial-up Modem / Cable modem

Internet Connection Account Internet Explorer 6.0 Java enabled in IE

DIAL-N-TRADE
Trade in Equity by using phone!
Free with your Sharekhan Classic Account, the Dial-n-Trade service enables one to place orders for buying and selling shares through telephone.

TWO dedicated numbers for placing orders with cell phone or landline. Toll free number: 1-800-22-7050. For people with difficulty in accessing the toll-free number, it also has a Reliance number 30307600, which is charged at Rs. 1.50 per minute for STD calls.

Automatic funds transfer with phone banking (for Citibank and HDFC bank customers)

No waiting time. Enter your TPIN to be transferred to our teleprokers One also get the trusted, professional advice of our telebrokers After hours order placement facility between 8.00 am and 9.30 am Reliable service, wherever you are

Requirements
All one need is access to a phone - either a landline or a cell phone:

If calling from a cell phone, please dial 022-1-800-22-7050 Currently for Citibank and HDFC customers, more banks to be added soon After hour order timings: 8.00 am to 9.30 am It takes approximately 10 minutes of your time to place an order

SHARE SHOPS
Visit Share Shops! Get everything need at a Sharekhan outlet! All one have to do is walk into any of 588 share shops across 213 cities in India to get a host of trading related services - friendly customer service staff will also help with any account related queries one may have. A Sharekhan outlet offers the following services:

Online BSE and NSE executions

o

(Through BOLT and NEAT terminals)

Free access to investment advice from Sharekhan's research team

Sharekhan Value Line (a fortnightly publication with reviews of recommendations, stocks to watch out for etc)

Daily research reports and market review

o

(High Noon, Eagle Eye)

Pre-market Report (Morning Cuppa) Daily trading calls based on technical analysis Cool trading products (Daring Derivatives, Trading Ring and Market Strategy)

Personalised advice Live market information Depository services: Demat and Remat transactions Derivatives trading (Futures and Options) Internet-based online trading: Speed Trade, Speed Trade Plus

MUTUAL FUNDS
Mutual Fund
A mutual fund is a pool of money that is invested according to a common investment objective by an asset management company (AMC). The AMC offers to invest the money of hundreds of investors according to a certain objective - to keep money liquid or give a regular income or grow the money long term. Investors buy a scheme if it fits in with their investment goals, like getting a regular income now or letting the money accumulate over the long term. Investors

pay a small fraction of their total funds to the AMC each year as investment management fees.

COMMODITIES FUTURES
process of economic liberalization in India began in 1991.

The

As part of this process, several capital market reforms were carried out by the capital market regulator Securities and Exchange Board of India. One such measure was to allow trading in equities-based derivatives on stock exchanges in 2000. This step proved to be a shot in the arm of the capital market and volumes soared within three years. The success of the capital market reforms motivated the government and the Forward Market Commission (the commodities market regulator) to kick off similar reforms in the commodities market. Thus almost all the commodities were allowed to be traded in the futures market from April 2003. To make trading in commodity futures more transparent and successful, multicommodity exchanges at national level were also conceived and these next generation exchanges were allowed to start futures trading in commodities on-line.

Commodities exchanges have seen a surge in commodity futures volumes in the last few months. This rise in volumes has been led by bullion (gold and silver) trading. Today a whole lot of commodities are available for trading in futures and the list is getting bigger by the day. No wonder then that the commodity futures market is being viewed as a significant business segment by many businessmen, investors, institutions, brokers, banks et al.

DEMAT SERVICES

Convenient, Secure and Automated Demat services

Dematerialization and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository.

Sharekhan Depository Services offers dematerialization services to individual and corporate investors. It has a team of professionals and the latest technological expertise dedicated exclusively to its demat department, apart from a national network of franchisee, making our services quick, convenient and efficient. At Sharekhan, its commitment is to provide a complete demat solution which is simple, safe and secure.

PORTFOLIO MANAGEMENT SERVICES

HNI Investor in Equities & Derivatives
Personalized portfolio management, tracking & restructuring

advice
Monthly stock valuation statements, reports & profitability

statements
Daily reports on transactions sent in printed format as well as

available online 24/7

Exclusive invites to analyst & management meets

SHAREKHAN COMPLETELY ACCOUNTABLE

PROTECH Investments based on technical analysis of price movements PROPRIME Investments based on primary research of company fundamentals

 Balanced scheme Aggressive Scheme

PROARBITRAGE Investments to exploit price arbitrage

NSDL & CDSL

At present there are two depositories in India, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). NSDL is the first Indian depository; it was inaugurated in November 1996. NSDL was set up with an initial capital of US$28mn, promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and National Stock Exchange of India Ltd. (NSEIL). Later, State Bank of India (SBI) also became a shareholder. The other depository is Central Depository Services Limited (CDSL). It is still in the process of linking with the stock exchanges. It has registered around 20 DPs and has signed up with 40 companies. It had received a certificate of commencement of business from Sebi on February 8, 1999. These depositories have appointed different Depository Participants (DP) for them. An investor can open an account with any of the depositories DP. But transfers arising out of trades on the stock exchanges can take place only amongst accountholders with NSDL's DPs. This is because only NSDL is linked to the stock exchanges (nine of them including the main ones-National Stock Exchange and Bombay Stock Exchange). In order to facilitate transfers between investors having accounts in the two existing depositories in the country the Securities and Exchange Board of India has asked all stock exchanges to link up with the depositories. Sebi has also directed the companies registrar and transfer agents to effect change of registered

ownership in its books within two hours of receiving a transfer request from the depositories. Once connected to both the depositories the stock exchanges have also to ensure that inter-depository transfers take place smoothly. It also involves the two depositories connecting with each other. The NSDL and CDSL have signed an agreement for inter-depository connectivity.

ABOUT NSDL
Although India had a vibrant capital market, which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialized form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimize risk and reduce costs. At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.

Promoters / Shareholders
Industrial Development Bank of India (IDBI) -the largest development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and National Stock Exchange (NSE) - promotes NSDL the largest stock exchange in India. Some of the prominent banks in the country have taken a stake in NSDL.

Promoters
Industrial Development Bank of India Unit Trust of India National Stock Exchange

Other Shareholders
State Bank of India Oriental Bank of Commerce Citibank NA Standard Chartered Bank

HDFC Bank Limited The Hong Kong and Shanghai Banking Corporation Limited

 Deutsche Bank Dena Bank Canara Bank

FUNCTIONS OF NSDL
NSDL performs the following functions through the depository participants (DPs).

Enable to surrender and withdrawal of securities to and from the depository (dematerialization and rematerialization) Maintains investors holdings in electronic form. Effects statements of securities traded on the exchanges. Carries out settlements of trades not done on the stock exchange (off-market trades). Transfer of securities Pledging/hypothecation of dematerialized securities Electronic credit in public offerings of companies or corporate actions Receipt of non-cash corporate benefits like bonus right, etc. in electronic form Stock lending and borrowing

SERVICES OFFERED BY NSDL

NSDL offers a host of services to the investor through its network of DPs

Maintenance of beneficiary holdings through DPs Dematerialization Off-market traders

Settlement in dematerialized securities Receipt of allotment in the dematerialized form Distribution of corporate benefits Rematerialization Pledging and hypothecation facilities Freezing/locking of investors account and Stock lending and borrowing facilities

BANK DEPOSITORY AN ANOLOGY

BANK Holds funds in an account Transfers funds between accounts on the instruction of the account holder Facilitates transfer without having to handle money Facilitates safekeeping of money DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder Facilitates transfer of ownership without having to handle securities Facilitates safekeeping of securities

THE DISPARITY BANK & NSDL

BANK Either of holders can instructions Minimum balance to maintained Entitled for interest Uses balanced in accounts Nomination is kept confidential sign be All joint to instructions No minimum balance required NSDL holders have sign

Interest can be earned only by participating in stock lending scheme Does not move balances in accounts without holders authorization Signature and photograph of nominee is to be provided

DEPOSITORY SYSTEM - BUSINESS PARTNERS

NSDL carries out its activities through various functionaries called "Business Partners" who include Depository Participants (DPs), Issuing companies and their Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. NSDL is electronically linked to each of these business partners via a satellite link through Very Small Aperture Terminals (VSATs) or through Leased landlines. The entire integrated system (including the electronic links and the software at NSDL and each business partner's end) is called the "NEST" [National Electronic Settlement & Transfer] system.

DEPOSITORY PARTICIPANT (DP)

The investor obtains Depository Services through a DP of NSDL. A DP can be a bank, financial institution, a custodian, a broker, or any entity eligible as per SEBI (Depositories and Participants) Regulations, 1996. The SEBI regulations and NSDL byelaws also lay down the criteria for any of these categories to become a DP.

Just as one opens a bank account in order to avail of the services of a bank, an

investor opens a depository account with a DP in order to avail of depository facilities. Though NSDL commenced operations with just three DPs, Depository Participant Services are now available in most of the major cities and towns across the country.

Benefits of Depository System

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. NSDL provides numerous direct and indirect benefits like:

Elimination of bad deliveries In the depository environment, once holdings of an investor are dematerialized, the question of bad delivery does not arise i.e. they cannot be held "under objection". In the physical environment, buyer was required to take the risk of transfer and face uncertainty of the quality of assets purchased. In a depository environment good money certainly begets good quality of assets. Elimination of all risks associated with physical certificates- Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates etc. This problem does not arise in the depository environment. No stamp duty for transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds. Immediate transfer and registration of securities - In the depository environment, once the securities are credited to the investors account on pay

out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months and is rarely completed within the statutory framework of two months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is to hold the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the securities are not good for delivery and the investor would also stand to loose his corporate entitlements.

Faster settlement cycle - The settlement cycle follow rolling settlement on T+2 basis i.e. the settlement of trades will be on the 2nd working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor. Faster disbursement of non cash corporate benefits like rights, bonus, etc. - NSDL provides for direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit. Reduction in brokerage by many brokers for trading in dematerialised securities Brokers provide this benefit to investors as dealing in dematerialized securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker. Reduction in handling of huge volumes of paper Periodic status reports to investors on their holdings and transactions, leading to better controls. Elimination of problems related to change of address of investor - In case of change of address, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their DP with all relevant documents and the required changes are effected in the database of all the companies, where the investor is a registered holder of securities. Elimination of problems related to transmission of demat shares - In case of dematerialized holdings, the process of transmission is more

convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP whereas, in case of physical securities the surviving joint holder(s)/legal heirs/nominee has to correspond independently with each company in which shares are held.

Elimination of problems related to selling securities on behalf of a minor - A natural guardian is not required to take court approval for selling demats securities on behalf of a minor. Ease in portfolio monitoring since statement of account gives a consolidated position of investments in all instruments.

JOINING NSDL
NSDL carries out its activities through service providers like Depository Participants (DPs), Issuing companies and their Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. These entities are called business partners in NSDL terminology. These entities need to get integrated into NSDL depository system to be able to provide various services to the investors and Clearing Members. The investor can obtain depository services through a depository participant of NSDL. Just as one opens a bank account in order to avail of the services of a bank, an investor opens a depository account with a depository participant in order to avail of depository facilities. A clearing member can open a special account in the depository system for the purpose of settling trades done on stock exchanges. The clearing account enables the clearing member to receive securities from its clients for delivery to the Clearing House/Clearing Corporation as pay-in, and to distribute the payout to its clients received from the Clearing House/Clearing Corporation.

Issuer can make dematerialization services available to their shareholders by signing an agreement to that effect with NSDL. After the agreement is entered into, an electronic link is established between NSDL, Issuer or its R & T Agent. The clearing corporations/houses of stock exchanges also have to be electronically linked to the depository in order to electronically receive securities delivered by clearing members towards pay-in and to give out securities to clearing members towards pay-out.

Joining NSDL as Depository Participant

NSDL depository reaches its services to investors through market intermediaries called Depository Participants (DP), who as per SEBI regulations could be organizations involved in the business of providing financial services like banks, brokers, custodians, financial institutions, etc. This system of using the existing distribution channel helps NSDL to reach to a wide cross section of investors spread across a large geographical area. The admission of the DPs involves a detailed evaluation by NSDL and a further evaluation and approval by SEBI. Realizing the potential in this market, all the custodians in India and a number of banks, financial institution and major brokers have already joined NSDL as DPs and they are providing services in a number of cities. Many more organizations are in various stages of establishing connectivity with NSDL.

ELIGIBILITY
As per Regulation 19(a) of SEBI (Depositories & Participants) Regulations, following are the categories that are eligible to become DPs: (i) A public financial institution as defined in section 4A of the Companies Act, 1956 (1 of 1956) (ii) A bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) (iii) A foreign bank operating in India with the approval of Reserve Bank of India (iv) A state financial corporation established under the provisions of section 3 of the State Financial Corporations Act, 1951 (63 of 1951) (v) An institution engaged in providing financial services, promoted by any of the institutions mentioned in sub clause (i), (ii), (iii), (iv), jointly or severally (vi) A custodian of securities who has been granted a certificate of registration by the Board under sub-section (1A) of section 12 of the Act (vii) A clearing corporation or a clearing house of a stock exchange (viii) A stock broker who has been granted certificate of registration by the Board under sub-section (1) of section 12 of the Act: Provided that the stock broker shall have a minimum net worth of rupees 50 lakhs and the aggregate value of the portfolio of securities of the beneficial owners held in dematerialised form in a depository through him

(ix)

shall not exceed 100 times of the net worth of the stock broker. Provided further that if the stock broker seeks to act as a participant in more than one depository, he shall comply with the criteria specified in the first proviso separately for each such depository. A non-banking finance company, having a net worth of not less than rupees fifty lakhs Provided that such company shall act as a participant only on behalf of itself and not on behalf of any other person Provided further that a non-banking finance company may act as a participant on behalf of any other person, if it has a net worth of Rs. 50 core in addition to the net worth specified by any other authority. A registrar to an issue or share transfer agent who has a minimum net worth of Rs. 50 lakhs and who has been granted a certificate of registration by the board under sub-section (1) of section 12 of the Act.

(x)

RULES AND REGULATIONS

The Regulations empower NSDL to set its own selection criteria in the Bye Laws. Therefore, the applicants must also adhere to the following admission criteria stated in NSDL Bye Laws: The applicant should have a minimum Net worth of Rs.1 crore. The applicant should not have been convicted in any of the five years immediately preceding the filing of the application in any manner involving misappropriation of funds & securities, theft, embezzlement of funds, fraudulent conversion or forgery. The applicant should not have been expelled, barred or suspended by SEBI, self-regulatory organization or any stock exchange. Applicant shall be required to furnish information and details of his business history for a minimum period of three years; provided that the Depository may, if it is satisfied that it would be in the interest of the investors and the applicant is otherwise eligible to become a participant, waive this requirement of three years.

PROCEDURE FOR BECOMING A DEPOSITORY PARTICIPANT

Eligible entities may apply to NSDL in Form E as prescribed by SEBI (Depositories and Participants) Regulations, 1996. An applicant has to submit the duly filled application form (two sets in original) to NSDL.
Along with the Application Form, the applicant has to enclose the following details: 1. Business history of the applicant for the last three years; 2. Net worth as certified by a Chartered Accountant as per the latest audited accounts; 3. Copies of annual report for the past three years; 4. The Board of Directors in case of Corporate Entity or of a similar authority in any other case; 5. Office space earmarked in square feet for depository operations;

6. Specimen Signatures of the officials responsible for acting on behalf of the applicant. 7. Name, Designation & Qualification of Compliance officer.
8. Shareholding pattern. o NSDL forwards Forms A, A1, B & C1 to the applicant.

9 Applicant submits Form A & A1 duly filled to NSDL. 10 Applicant may order and install the following after getting okay from NSDL: o Hardware
o Telecommunication network equipment i.e. VSAT for connectivity

with NSDL. [This is optional for NSE members who are already linked to NSE via VSAT. 11 he applicant forwards "Application Fee" of Rs. 5,000/- payable to SEBI to NSDL. Demand Draft should be drawn in favor of 'Securities and Exchange Board of India' payable at Mumbai. 12 The applicant confirms installation of the requisite hardware, router & VSAT equipment & by submitting Form B duly filled. 13 If NSDL is satisfied with details given in Form B, application will be forwarded to SEBI. 14 Applicant attends training conducted by NSDL covering all operational aspects of the depository system. 15 The applicant forwards Form C1 duly filled to NSDL. 16 The applicant installs the software in the test environment under the guidance of NSDL & forwards the checklists generated in the installation procedure. 17 If checklists are okay, pilot testing will be commenced. 18 On successful completion of pilot testing, NSDL sends its recommendation to SEBI for registration of the applicant. 19 On receiving the in-principle approval from SEBI, the applicant pays the following fees to SEBI through NSDL within 15 days: Sr. No. Fees 1. Registration Fee 2. Annual Fee: Rs. 1,00,000 1,000

SEBI grants a Certificate of Registration to the applicant. NSDL and the applicant sign Depository-Participant agreement.

The DP pays the following amounts to NSDL Sr.No. 1. 2. 3. 4. 5. Fees Entry Fee Interest - free Security Deposit [refundable] DPM Application Software Charges Dongle Charges Insurance Premium Total Rs. 25,000 10,00,000 2,50,000 1,550 32,000 13,08,550

The applicant re-installs the software in the live environment as per the instruction given by NSDL and forwards the checklist generated by the installation for live environment duly filled to NSDL (details would be provided with Installation Manual). NSDL makes the participant "live". DP may start its commercial operations.

System Specification
The Participant will have his own I.T. set up installed in his office, which will be connected to the Depository system situated at National Securities Depository Limited, Trade world, 4th Floor, Kamala Mills Compound, Lower Parel, Mumbai 400 013, using appropriate telecommunication links. The hardware, software & telecommunication equipment should be as specified by NSDL. The Participant should ensure continuous electronic means of communication (connectivity) with NSDL. The minimum I.T. set up required for a Participants entry level system would comprise of single CPU Server (upgradeable to dual or quad CPUs), at least one client/ node and networking hardware. The Participant may configure additional CPU, memory, disks and nodes based on the volume of business envisaged. Hardware Set-up

 Software Set-up Telecommunications Set-up Sizing guidelines for an appropriate system configuration Points to be followed for Hardware installation & connectivity with NSDL

Investments and expenses to be incurred by a participant

The cost to be incurred by a Participant can be divided into:

Initial Capital Cost & Annual Recurring Cost

Capital cost
The initial capital cost to be incurred by a Participant can further be sub divided into:

Infrastructural Cost Security Deposit & Initial Fees

1. Infrastructural Cost

This will include cost related to office space required for conducting Depository operations and hardware & software cost. The space should be enough to allow for one server, one router, two nodes & provide easy movement to at least one operator. Additional space required will vary amongst Participants & will depend on volume of trades. Most categories of Participants being large institutions already having a network of offices/branches, the space cost will be notional. Tentative initial hardware & software cost :

Sr. Particulars Payable to Amount No Range (Rs.) 1. Hardware Server ( a ) High End Server (Max. Client A/c - 5,00,000 and Vendor 1,75,000/- to No. of Transaction / day - 1,00,000) 2,40,000/( b ) Entry Level Server with Hardware (onboard) RAID Vendor 1,25,000/- to (Max. Client A/c - 5,00,000 and No. of Transaction / 1,80,000/day - 40,000) ( c ) Entry Level Server without Hardware RAID (Max. Vendor 1,20,000/- to Client A/c - 1,00,000 and No. of Transaction / day 1,58,000/22,500) Dial up (Synch/ Asynch) modem Vendor 17,000 to 1,00,000 ( d ) Desktop as Server (Max. Client A/c - 75,000 and Vendor No. of Transaction / day - 15,000) Node / Client Scanner Printer (Deskjet Printer) Printer (Entry level Laserjet Printer) Router + Cables Dial up modem (Async-Only PPP Connectivity) UPS Hardware Token (Dongle) Total Hardware charges with server stated in (a ) Total Hardware charges with server stated in ( b ) Total Hardware charges with server stated in ( c ) Total Hardware charges with server stated in ( d ) 2. VSAT Charges VSAT [deposit recovered over 3 yrs.] VSAT activation charges Vendor Vendor Vendor Vendor Vendor Vendor Vendor NSDL * * * * 35,000/45,000/to

30,000/- to 37,000/3,500/to 5,500/6,000/to 7,500/20,000/- to 25,000/90,000/1,000/20,000/- to 30,000/1,550/3,27,050/- to 4,30,050/2,77,050/- to 3,70,050/2,72,050/- to 3,48,050/1,87,050/- to 2,13,050/2,00,000/17,750/-

NSE HCL Comnet

3.

4.

5.

Total VSAT related initial charges Lease Line Charges Local Leased Line users within Mumbai and Delhi NSDL (Hierarchical Network) - (inclusive of local leased line charges) Inter-city Leased Line users from any other city NSDL connecting directly to NSDL - Mumbai (This includes Delhi BPs who have not availed of Hierarchical Network) - Only NSDL Charges Leased Line charge shall be extra and payable on actual (as per circuit bills) ISDN Charges (optional) Annual charges for dedicated ISDN line (Charges NSDL towards reserving one ISDN line and associated port for Participant at NSDL end) Software DPM Application Software license (New set-up) NSDL DPM Application Software license (Scale Down) NSDL Windows 2000 Server with Service Pack Vendor Windows 2000 Professional Vendor SQL server 2000 software with 5 user license ** Vendor WINZIP Software License (minimum two) Vendor Anti-virus Vendor Total Software (Full Set-up) Total Software (Scale Down)

2,17,750/75,000/36,500/-

83,900/-

2,50,000/1,25,000/30,000/10,500/55,000/2,000/1,000/3,48,500/2,23,500/-

Price variation is due to the Local / MNC make system with memory ranging from 512 MB to 2 GB. ** MS-SQL full server pack comes with five user license. Of these five user licenses, one is used for server itself and one is used by NSDL Helpdesk for remote login set-up. Participants having more than three desktop clients shall procure additional MS-SQL client access licenses in proportion to the additional number of desktop clients.
2. Security Deposit and Initial Fees

The following security deposits & fees should be paid by a Demand Draft or a Bankers Cheque

Particulars No Payable To Amount (Rs.) Application Fees SEBI 5,000 Registration Fees SEBI 1,00,000 Entry Fee NSDL 25,000 Security Deposit [refundable] CC/CH NSDL 10,00,000 is exempt from payment of security deposit Total 11,30,000 Thus the total initial cash outlay to be incurred by a Participant will range between Rs. 16 to Rs. 20 lakh [i.e., total of Infrastructural cost and Security deposit & Initial fees]. In addition to this, a notional cost for office space will be added to the capital cost.

Annual recurring cost

The annual recurring cost may further be sub-divided into:

Fees & Deposits Other operational cost 1. Fees & Deposits

1.1 Fees payable to SEBI Each Participant must pay an annual fee of Rs. 1,000 to SEBI as per the details given in the Second Schedule of the SEBI Regulations. 1.2 Charges payable to NSDL
2. Operational Cost

The operational cost can be sub-divided into: a) Expenses on Man Power: Each Participant needs a System Administrator for Participant Operations. While a large Participant will need a separate operator for data entry, average and small participants need not have one. It is expected that the

system administrator himself will enter the orders and take care of things such as back up of data, generation of reports, administration of client database, etc. For back office operations a large Participant will need 6 to 8 employees at officer level, an average Participant will need about 2 to 3 employees & a small Participant needs only 1 employee. Every Participant also needs a Manager to coordinate all the back office work. A compliance officer has to be appointed to ensure compliance with the rules and regulations governing Participant operations. b) Insurance Cost: The participants will also incur annual insurance cost. The premium paid by a Participant is a minimum of Rs. 32,000 p.a. The insurance premium is based on depository usage by a Participant. The insurance cover of a Participant shall cover the losses pertaining to the Business Risks & System failure of the Participant in the depository. In case of Business risk there is no annual upper limit on the number of claims that can be made. However the maximum amount in respect of each claim is Rs. 25 crore. In case of system risk the maximum amount of claim is Rs. 25 crore per annum. c) Other Expenses: Apart from the above mentioned expenses, the Participant will also incur certain other expenses like electricity, conveyance, printing & stationery, legal & professional, auditor's remuneration, staff welfare expenses etc. It is estimated that these expenses will constitute about 15% of the operating expenses.

Depository accounts are of three types:

Beneficiary account: An investor who wants to hold securities in dematerialised (demat) form and receive or deliver securities by interaccount transfers must have a depository account called beneficiary account with a DP of his choice. Clearing member account: Member brokers of those stock exchanges which have established electronic connectivity with NSDL need to open a

clearing member account, with a DP of his choice, to clear and settle trades in the demat form. This account is popularly known as Settlement account or "Pool account". This account is meant only to transfer securities to and receive securities from the clearing corporation/ house and hence, the member broker does not have any ownership (beneficiary) rights over the shares held in such an account.

Further, clearing members of stock exchanges permitting Automatic Lending or Borrowing Mechanism (ALBM) transactions can request for a "clearing member ALBM" account to participate in ALBM transactions. These additional CM Accounts maintained for the purpose of ALBM transactions will have to be necessarily opened with the clearing house of the concerned stock exchange e.g. a BSE clearing member's "normal clearing member account" could be with a DP XYZ, but his "clearing member ALBM" account will have to necessarily be with the clearing house of the BSE. Intermediary account: Any person choosing to act as an approved 'intermediary' for stock lending and borrowing needs to open an intermediary account with any DP of his choice. An intermediary account may be opened with the DP only after the intermediary has obtained registration from the Securities & Exchange Board of India and with the prior approval of NSDL. This account is meant only to deposit the securities received from the lender and lend them to the borrower under stock lending and borrowing scheme.

FEE PAYABLE BY DEPOSITORY PARTICIPANTS Entry fees

Each DP shall pay, to the Depository, a non-refundable Entry Fee of Rs. 25,000.

Transaction related fees

The following transaction related fees shall be payable by the DPs to the Depository:

Settlement fee:
i.

A settlement fee at the rate of Rs. 6 per debit instruction in a Client's account shall be charged to the DP of the Client.

ii.

A settlement fee at the rate of Rs.1.00 per instruction in respect of securities received from the clearing Corporation into the Receipt-in account of each Clearing Member maintained with the DP subject to a minimum of Rs.1000 and a maximum of Rs.20, 000 per quarter per CM Account shall be charged to the DP.

iii.

A settlement fee at the rate of Rs.6 per debit instruction for transfer of securities by way of inter-settlement transfers in the CM Account(s) shall be charged to the DP.

iv.

A settlement fee at the rate of Rs.6 per debit instruction for transfer of securities from the CM account of a Clearing Member to the CM account of another Clearing Member shall be charged to the DP of the delivering Clearing Member.

Provided however that no settlement fee shall be charged:

a. in respect of commercial papers and short term debt instruments such as

certificate of deposits, MIBOR linked papers etc.; and b. in case of : i.

ii.

transfers necessitated by transmission on death of the Client; and transfer of the accounts of Clients from one DP to another as a consequence of expulsion or suspension of such DP.

Pledge Fees
A fee at the rate of Rs.25 per instruction for creation of pledge / hypothecation shall be charged to the Participant of the pledgor/ hypothecator. No fee shall be charged when a pledge / hypothecation is closed or invoked.

Lending and Borrowing fee

A fee at the rate of Rs.25 per instruction shall be charged to the Participant of the borrower in respect of credit of securities to the account of the borrower. No fee shall be charged at the time of repay or recall of securities.

Custody fees Nil FEE FOR DEMATERIALISATION & REMATERIALISATION

No fee shall be charged by the Depository on dematerialisation requests. However, in case of rematerialisation request, a flat fee of Rs.10 per certificate shall be charged to the Participant.

Minimum fee
In case the total fee billed to the Participant in a financial year is less than the minimum fee of Rs. 1,50,000 then the Participant shall be charged the difference thereof.

Security deposit
Every Participant shall pay to the Depository Rs.10 lakh by way of interest free refundable security deposit. However, a Clearing Corporation or a Clearing House of a Stock Exchange will be exempt from payment of security deposit.

DEMATERIALISATION
Dematerialisation is the process by which a client can get physical certificates converted into electronic balances. An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL credits the securities in the depository account of the Investor with the DP.

Features:

Holdings in only those securities that are admitted for dematerialisation by NSDL can be dematerialised. Only those holdings that are registered in the name of the account holder can be dematerialised. Names of the holders of the securities should match with the names given for the demat account. If the same set of joint holders held securities in different sequence of names, these joint holders by using ' Transposition cum Demat facility' can dematerialise the securities in the same account even though share

certificates are in different sequence of names. e.g., If there are two share certificates one in the name of X first and Y second and another in the name of Y first and X second, then these shares can be dematerialised in the depository account which is in any name combination of X and Y i.e., either X first and Y second or Y first and X second. Separate accounts need not be opened to demat each share certificate. If shares are in the name combinations of X and Y, it cannot be dematerialised into the account of either X or Y alone. Check the demat performance of the companies whose shares are to be given for dematerialisation. Demat requests received from client (registered owner) with name not matching exactly with the name appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, can be processed, provided the signature of the client on the Dematerialisation Request Form (DRF) tallies with the specimen signature available with the Issuers or its R & T agent.

Procedure:

The client (registered owner) will submit a request to the DP in the Dematerialisation Request Form for dematerialisation, along with the certificates of securities to be dematerialised. Before submission, the client has to deface the certificates by writing "SURRENDERED FOR DEMATERIALISATION". The DP will verify that the form is duly filled in and the number of certificates, number of securities and the security type (equity, debenture etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgement slip duly signed and stamped, to the client. The DP will scrutinize the form and the certificates. This scrutiny involves the following :
o

Verification of Client's signature on the dematerialisation request with the specimen signature (the signature on the account opening

form). If the signature differs, the DP should ensure the identity of the client.
o o o o o

Compare the names on DRF and certificates with the client account. Paid up status ISIN (International Securities Identification Number) Lock - in status Distinctive numbers

In case the securities are not in order they are returned to the client and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case:
o

A single DRF is used to dematerialise securities of more than one company. The certificates are mutilated, or they are defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof. Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities. Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF

In case the securities are in order, the details of the request as mentioned in the form are entered in the DPM (software provided by NSDL to the DP) and a Dematerialisation Request Number (DRN) will be generated by the system. The DRN so generated is entered in the space provided for the purpose in the dematerialisation request form. A person other than the person who entered the data is expected to verify details recorded for the DRN. The request is then released by the DP which is forwarded electronically to DM (DM - Depository Module, NSDL's software system) by DPM. The DM forwards the request to the Issuer/ R&T agent electronically. The DP will fill the relevant portion viz., the authorisation portion of the demat request form. The DP will punch the certificates on the company name so that it does not destroy any material information on the certificate. The DP will then despatch the certificates along with the request form and a covering letter to the Issuer/ R&T agent. The Issuer/ R&T agent confirms acceptance of the request for dematerialisation in his system DPM (SHR) and the same will be forwarded to the DM, if the request is found in order. The DM will electronically authorise the creation of appropriate credit balances in the client's account. The DPM will credit the client's account automatically. The DP must inform the client of the changes in the client's account following the confirmation of the request. The issuer/ R&T may reject dematerialisation request in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the

objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialisation request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.

SAVINGS
Trading in dematerialized shares results in substantial savings for the investors. Following tables gives an idea about these savings. Savings for a person who buy shares for long term investment. (On a purchase of Rs10000) Item Brokerage *Stamp Duty Postal Charges Company Objection Settlement charges Custody (5 years) Total Physical (Rs) 75-100 50 10-30 10-30 Depository (demat) (RS) 50-75 5-10 10-50 Savings (Rs) 25-50 50 10-30 10-30 -(5-10) -(10-50) 35-100

* Stamp duty of 0.5% # Custody charge of 0.05%- 0.1% Savings for an investor who sells dematerialized shares (For a sale of Rs10000)

Item *Brokerage Company Objection (courier, etc.) Settlement charges Total

Physical (Rs) 75-100 10-30 -

Depository (demat) (Rs) 50-75 -(5-10)

Savings (Rs) 25-50 10-30 -(5-10) 25-75

Many brokers offer reduced brokerage for selling of dematerialized securities since they will not have the fear of bad delivery

Savings for a trader who buys and sells very often. (For a trader who turns over his portfolio of Rs10000 ten times in a year.) Item *Brokerage Settlement charges Custody (5 years) Total Physical (Rs) 750-1000 Depository (demat) (Rs) 500-750 50-100 2-10 Savings (Rs) 250-500 -(50-100) -(2-10) 140-390

* Many brokers offer reduced brokerage for sell of dematerialized securities since they would not have fear of bad delivery

REMATERIALISATION
Rematerialisation is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account. The DP enters the request in its system which blocks the client's holdings to that extent automatically. The DP releases the request to NSDL and sends the request form to the Issuer/ R&T agent. The Issuer/ R&T agent then prints the certificates, dispatches the same to the client and simultaneously electronically confirms the acceptance of the request to NSDL. Thereafter, the client's blocked balances are debited.

FEATURES:

A client can rematerialise his dematerialised holdings at any point of time. The rematerialisation process is completed within 30 days. The securities sent for rematerialisation cannot be traded.

PROCEDURE

The client will submit a request to the DP for rematerialisation of holdings in its account. On receipt of the request form, the DP will verify that the form is duly filled in and issue to the client, an acknowledgement slip, signed and stamped. The DP will verify the signature of the client as on the form with the specimen available in its records. If the signatures are different the DP will ensure the identity of the client. If the form is in order the DP will enter the request details in its DPM (software provided by NSDL to the DP). While entering the details, if it is found that the client's account does not have enough balance, the DP will not entertain the request. The DP will intimate the client that the request cannot be entertained since the client does not have sufficient balance. If there is sufficient balance in the client's account, the DP will enter the request in the DPM and the DPM will generate a Rematerialisation Request Number (RRN). The RRN so generated is entered in the space provided for the purpose in the rematerialisation request form. Details recorded for the RRN should be verified by a person other than the person who entered the data. The request is then released to the DM by the DP. The DM forwards the request to the Issuer/ R&T agent electronically. The DP will fill the authorisation portion of the request form. The DP will then dispatch the request form to the Issuer/ R&T agent. While processing the request, the Issuer/ R&T agent may report some objections. Depending on the nature of objection, the Issuer/ R&T agent may reject the request or process it partially, seeking rectification for the remaining, and send an objection memo to the DP. The Issuer/ R&T agent accepts the request for rematerialisation prints and dispatches the certificates to the client and sends electronic confirmation to the DM.

The DM downloads this information to the DPM and the status of the rematerialisation request is updated in the DPM. The DP must inform the client about the changes in the client account following the acceptance of the request.

Market Transfers
Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers.

Features:
Delivery of securities to or from a clearing member are called "Market Trades" in the depository system. A simple way of determining whether a trade is a market trade is that, either source or target in a transfer instrument is a CM account; such a transfer is a "Market Trade"

Procedure in Case of Market Transfer for Retail Investors:

In the diagram, the selling client and clearing member1 have their respective accounts with DP1 and the buying client and clearing member2 have their respective accounts with DP2. DP1, DP2 and the Clearing Corporation/ Clearing House have on line electronic connectivity with NSDL. The following paragraphs, explain the flow of securities to effect settlement of a market trade: Step-1: - Seller gives delivery instruction to DP1 to debit his account and transfer securities to "Clearing Member1 Pool A/c" with DP1. [Clearing Member1 gives corresponding receipt instruction to DP1 to accept in his clearing account securities transferred by seller through DP1 if he has not already given standing receipt instruction for all credits into his clearing account.] Step-2: - Securities are transferred from "Selling Client A/c" to "Clearing Member1 Pool A/c" with DP1.

Step-3: - Clearing Member1 gives delivery to CC instruction to DP1 to debit his "Clearing Member1 Pool A/c" and credit his "Clearing Member1 Delivery A/c". The transfer will take place on the "execution date" mentioned in the instruction. Delivery to CC instruction to be given as per final/ net delivery obligation.

Step-4: - Securities lie in the "Clearing Member1 Delivery A/c" till settlement day. At the time of pay-in, securities lying in "Clearing Member1 Delivery A/c" are automatically flushed to the Clearing Corporation/ Clearing House. No debit instruction is needed for this transfer. The deadline time for pay-in of securities to the Clearing Corporation/ Clearing House may vary from one exchange to another. Step-5: - At the time of pay-out securities are transferred from the Clearing Corporation/ Clearing House to "Clearing Member2 Receipt A/c" with DP2. No credit instruction is needed because this transfer is automatic.

Step-6: - Securities are transferred from "Clearing Member2 Receipt A/c" to "Clearing Member 2 Pool A/c". Receipt account of clearing members is purely a transit account for maintaining audit trail. Step-7: - Clearing Member2 gives a delivery instruction to DP2 to debit his "Clearing Member 2 Pool A/c" and credit "Buying Client A/c" with DP2. [Buyer gives corresponding receipt instruction to DP2 to accept in his account securities transferred from "Clearing Member2 Pool A/c" through DP2 unless he has not given a standing instruction to receive credits to his account.

Note: - Funds are not handled by NSDL. Clearing Member2 obtains cheque from buyer and gives it to the Clearing Corporation/ Clearing House. Only after the cheque is cleared by clearing bank, the Clearing Corporation/ Clearing House allows credit of securities to clearing member2 and thereafter, communicates the match to NSDL.

Step-8: - Securities are transferred to "Buying Client A/c" from "Clearing Member2 Pool A/c" with DP2. Note: Until delivery instruction is given by the clearing member, the securities will remain in his "Pool A/c". However, if they are not transferred to a "Beneficial Owner A/c", the securities will not be eligible to any corporate benefits like bonus, dividends, etc.

Off - Market Transfers

Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers.

Features:
Trades which are not settled through the Clearing Corporation/ Clearing House of an exchange are classified as "Off Market Trades". Delivery of securities to or from sub brokers, delivery for trade-for-trade transactions, by this definition are off-market trades. Procedure in case of an Off-Market Transfer Involving Two Clients: The selling client will have to give a delivery instruction to his DP to transfer securities from his depository account to the buying client's depository account. To

receive securities from the selling client's depository account, the buying client must give a receipt instruction if he has not already given a standing receipt instruction to his DP. The details in the "delivery" and "receipt" instructions must match else the transfer will not take place. The transfer will take place on the "execution date" indicated in the instructions. If the buying client has given a standing receipt instruction, this may be ignored. The payment aspect is handled outside the NSDL environment between the selling and buying clients.

Pledge / Hypothecation Features:

Securities held in a depository account can be pledged/hypothecated to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have account in NSDL depository. The pledge/hypothecation transactions go through the following procedures:

Pledge/hypothecation creation Pledge/hypothecation closure Pledge/hypothecation invocation

Transmission
One of the lesser-known but widely experienced problems with respect to dealing in share certificates is transmission of shares. The Companies Act distinguishes transmission of shares from transfer of shares. While transfer of shares relates to a

voluntary act of the shareholder, transmission is brought about by operation of law. The word 'transmission' means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. While transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarised copy of death certificate) to the company. On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder. In case the deceased shareholder had holdings in different companies, then in order to effect transmission of shares for these shares, the relevant documents must be sent to each of the companies, along with the share certificates. This results in a heavy reliance on the postal system. Follow-up may have to be made with each of the companies in order get the transmission affected before the book closure, if the survivor(s) wishes to avail of the benefits accrued through these shares.

IPO Initial Public Offerings

Credits for public offers can be directly received into demat account. In the public issue application form of depository eligible companies, there will be a provision to indicate the manner in which securities should be allotted to the applicant. All you have to do is to mention your client account number and the name and identification number of your DP. If the applicant is allotted securities in dematerialized form, but the details regarding the beneficiary account are incomplete/ wrong, the person will get physical delivery of allotted securities. If securities are allotted in the dematerialized form, these would be credited to applicants account any day between allotment date and listing date, at the discretion of the company.

The issuer company their R&T agent will forward the applicant the allotment advice giving the number of shares allotted in dematerialized form. Through this you can come to know that you have been allotted shares. An amendment to the company law requiring all future public issues above Rs100mn to compulsorily offer securities in dematerialized form is awaiting legislative approval. After this all the issues above Rs100mn will require investors to trade only in demat way. The company issues call notices to the beneficial holders of securities in the electronic form. The details of such beneficial holders will be provided to the issuer/ their R&T agent by NSDL. After the call money realization, issuer/ their R&T agent will electronically convert the partly paid up shares to fully paid up shares.

Online trading: Simple and fast but fewer options

C. Raja Rajeshwari

THE equity market is all excited, and going places. No doubt, you want to get your share of the action. Till recently, one could buy or sell stocks only through

individual stockbrokers and broking firms/companies. But now stock trading has gone online, and there are many Web-based share-trading platforms such as icicidirect.com, hdfcsecurities.com, investsmartindia.com and sharekhan.com. Most people just go to the broker their friends or relatives deal with or recommend. However, there is more to it than that. So, how should you choose a broker? That you need to be careful in choosing the broje is stating the obvious. Besides the quality of service, the choice of the broker may also have a bearing in the transaction cost. This may not matter for a long-term investor doing small volume trades. However, it will for the active trader or when the portfolio increases. The following should be considered before choosing a broker or online trading platform:

How easy is it to open an account, and does it match your trading requirements? Brokerage houses are fast simplifying the account opening process which is rigorous though. You must check if the broker is a trading member in more than one exchange. You also need to consider the minimum margin requirement. Brokers usually specify that you open an account with specific banks. You need to factor in the minimum balance requirement of the bank before opting for the broker. For instance, IndiaBulls has trading membership only in the NSE. So, you may not be able to transact on the BSE if you choose that firm. IndiaBulls also requires you to open a savings bank account with HDFC Bank, for which the opening balance is Rs 1,000. You will also be required to maintain a quarterly minimum balance of Rs 25,000. Some brokers also stipulate a minimum lot or transaction size for each deal. Check if the lot is in keeping with the usual size of your transactions. High

minimum lot sizes or minimum values can constrain your trading. For instance, ICICI Direct stipulates a minimum value of Rs 1,000. Does the broker allow you to short sell or margin trade? Some online brokerages do not. Many do, but may charge extra. Some brokers require you to hold your Demat account with them. Offline or online, most brokers require you to maintain a minimum balance which determines the trading limits. IndiaBulls allows you to trade eight times the amount maintained in your account. For delivery-based transactions, you can trade four times the amount. The remaining value should be transferred before the start of the next trading day. If not, an interest of 21 per cent per annum is levied on the outstanding balance. In the case of ICICI Direct, on placing your order, the entire value of the transaction is earmarked and blocked in your savings bank account for this purpose. This is possible as all the three accounts trading, savings bank and demat are linked. A 4 per cent interest accrues for the amount until the order is executed. Check the clauses carefully to see how much leverage (4/8 times) you get on the balance maintained, the penalty on non-remittance and whether interest accrues on the capital maintained with the broker. Brokers usually have recurring and one-time charges (account opening fees). Recurring charges are the annual maintenance fee and the brokerages on transactions. Brokerage is usually 0.25-0.85 per cent of the transaction value or a flat rate (between Rs 10 and Rs 50) on a per trade basis, whichever is less. Some brokerages charge customers with large accounts less. Annual charges for the demat account can be anything between Rs 250 and Rs 750. The brokerage may or may not include service tax. If you are an active investor with a high trading turnover, brokerage charges will leave a dent on the profits. Obviously, the lower the percentage rate, the better.

 If you are a low volume investor active or passive a stiff minimum charge will hurt. Therefore, choose a broker or a Web trader that either does not specify a minimum charge or levies a low one. Trading Web sites have their own order book, which is matched in the exchange's order book. Brokers may not always trade in your name. This could mean a potential conflict of interest. However, this is not a major problem now, as you can cross-check on the same day whether your broker has carried out the trading instructions in the NSE or the BSE. You can use the trade confirmation feature offered on the Web sites of both exchanges (www.bseindia.com and www.nseindia.com) to track your trades. The facility allows you to check your trades of the last five days too. You can verify the same day's trades after 7 p.m. on the NSE, and the next day on the BSE. You can also track your derivatives trades on the NSE site. To track the trades on the Web site of the exchanges, you need a client code, order size and time among other things. In the case of web trading, there are three ways to confirm your trade. One, the confirmation of the trade executed is available immediately on the screen. Second through e-mail and, third, through the electronic contract note.

Offline trading
With a broker, it becomes tedious to place orders when you are travelling. Broking houses do have tie-ups and branches in important cities. Check about the availability of such services. The online broking sites remove this difficulty from trading. But check whether an offline trade order can be placed if the site is not accessible.

Security
An immediate concern for investors using Net trading facilities is safety. SEBI mandates security measures for web trade, besides the usual user ID and multilevel passwords. However, it still pays to check with existing clients about the web trade site. In absence of such contacts, stay away from lesser-known sites. For a first time investor, it is prudent to trade with the facility backed by good

institutional support even if it means sacrificing some profits. It is helpful if your on-line/offline brokerages have customer service to answer queries.

Suitability
Online trading gives first-time and low-volume investors an edge over physical broker trading in terms of convenience. Also, it is more transparent. Banks that offer trading platforms make for seamless trading and payment options. The entire transaction process from placing the order to making payments and delivery takes place seamlessly, and requires minimal follow-up. The brokerage and demat rates are determined by the frequency and value of trades. The existing slab structures of brokerages tend to favour active traders. However, the costs are largely the same regardless of whether you are trading offline or online. Once you get the hang of the process you can shift to an offline broker, if needed. Given the present cost structures, there may be some savings to be had by making such a shift. This could change if the scale of online trading picks up. Then, online platforms may be able to lower their costs. So keep a tab on who offers what to use the costeffective trading platform.

Tools and services

IF YOU trade with an offline broker, you can either follow his advice as to when to buy or sell or make your own choice. There are Web sites, such as www.wow-india.com and www.equitymaster.com, which provide advisory services. But these sites should, at best, be used as one of the inputs in an investment decision. They should not be the sole reference point for a buy or sell. As you need to do your own stock picking, you need research materials such as historical stock charts.

 The standard tools include 15-20 minute delayed quotes, historical stock charts and news headlines. Typically, these services are available free on most online broking sites. However, if you are looking for real-time stock quotes, intraday charting customised ticker, research, information updates on stocks and the economy, and a real-time portfolio manager, you may have to pay an additional fee. If these services are not free, then they would be added on to the transaction costs. Evaluate your needs to ensure you do not end up paying for data you do not really need. If you are watching particular stocks, find out if you can customise the news you receive or alerts when the stocks reach a level. This may also help cut your access charges. If you want to invest in securities other than stocks, you would want to know about the breadth of products each brokerage firm offers. Financial planning tools such as customised stock and mutual fund screening, stock analyst information and research reports from top equity research firms are available for a price.

What you need to check

Check your client-broker agreement carefully for hidden clauses that may be detrimental. If your current offline broker offers you Net trading facility then you have to sign a fresh client-broker agreement with him. This agreement lists the rights and obligations of both parties in respect of trades routed through the Net. If you sign up with another broker, you will still have to sign two sets of client-broker agreements: One for trades routed through the Net and the other for trades done through the broker's trading terminals.

 Assess the reliability, speed and robustness of your broker's system. Check the response time on the trading screen. The lag between the price on the market watch screen and on the exchange should be less than 20 seconds. Confirmation of the execution of your order should reach you in less than 30 seconds. Ensure that the site is accessible through trading hours. Check the security features. Check for the mechanism of transfer, the margin to be maintained, the minimum order value. Check procedure for online settlement and time for settlement, penalties for lag in payment. In case of offline trading, in case you cannot access the Net, can the transactions be done through phone or fax?

COMPARISON TABLE
Category ACCOUNT OPENING CHARGES BANK ACCOUNT Account opening charge Can Existing Bank accounts be linked Minimum Balance ICICI Direct 750 Sharekhan 750 Kotak INDIABULLS securities 700 1000

Nil Yes 5000 (avg

Yes 5000 / 2500

Yes 0 (only

Yes 5000

quart bal )

Name of Banks

ICICI

No. of Bank Accounts that can be linked Type of Bank Account BROKERAGE DELIVERY MINIMUM BROKERAGE CallNTrade Charges Free calls How many cities Is it available Waiting for Connect IVR Trading CONTRACT NOTES Additional Charges

1 Saving 0.75 Rs.25/-

with kotak mahindra bank) For Online Kotak HDFC, Transfer: mahindra Citibank , UTI, Citibank, IDBI bank, ING Vysya & Bank, UTI Bank, HDFC ICICI. HDFC Bank, bank Indusand Bank, Union Bank, Oriental Bank Of Commerce 7 2 5 Savings/ Current Saving Saving/current .30 Rs. 7/-

0.5 .70 If trade value is < Rs. 25/4000 , Brokerage is lower of Rs20 N.A. Rs.25 per call Nil 20 in a month Nil 250+ All Over India Yes Yes No Yes No Yes Yes -

N.A.

No -

Nil

No

Frequency of Delivery On-line availability DEMAT Account Account opening Charge Annual Maintenance

Daily Yes

Daily Yes

Rs. 25/per request Monthly Yes

Nil

Daily Yes

Nil Rs. 500

Nil Rs 300

Nil Rs. 400

Nil Nil

Charge Name of Depository Participants

ICICI

No of Demat Accounts 5 that can be linked each for NSDL PRODUCTS Bonds Yes Equities (BSE + NSE) Yes EXPOSURE 3 to 4 times Futures Yes IPO's Yes Mutual Funds Yes Options Yes OTHER PRODUCTS SPOT & BTST Live Strimmer At No Simple Account Research Report No Is there any Charges SMS Services Yes Live Trading Terminal No Margin Against Shares No Square off of Margin 2.45 to 3.10 Trading PM

SSKI Securities Kotak Indiabulls Ltd securities Securities Ltd. Ltd. -

No Yes 4times Yes Yes Yes Yes Inclusive Yes Yes No Yes Yes Yes 3.30 PM

No Yes 4 times Yes Yes Yes Yes No Yes No Yes Yes No 3.30 P.M.

No Yes 4 times Yes Yes Yes Yes Yes Yes No No Yes No 3.30 P.M.

COMPARISON CHARTS FINDINGS & RESULTS Findings After analyzing the results it has been found that out of researched DPs
Indiabulls is charging the highest amount for account opening while Kotak securities is charging the least amount and at the same end ICICI & Sharekhan are charging equal amount.

Findings After analyzing the results it has been found that out of researched DPs
Sharekhan is having the highest number of linked banked accounts while ICICI is having the least number of linked bank accounts.

Findings Findings

After analyzing the results it has been found that out of researched DPs

Indiabulls is charging the least amount for delivery brokerage while ICICI is charging the highest amount. After analyzing the results it has been found that out of researched DPs

Indiabulls is charging the least amount for minimum brokerage while ICICI and Kotak Securities are charging the highest amount.

Findings After analyzing the results it has been found that out of researched DPs
Indiabulls is not charging any amount for AMC while ICICI is charging the highest amount. PRODUCTS ICICI SHAREKHAN No Yes 4times Yes Yes Yes Yes KOTAK SECURITIES No Yes 4 times Yes Yes Yes Yes INDIABULLS No Yes 4 times Yes Yes Yes Yes

Bonds Yes Equities (BSE + Yes NSE) EXPOSURE 3 to 4 times Futures Yes IPO's Yes Mutual Funds Yes Options Yes

Findings

After analyzing the results it has been found that out of researched DPs except ICICI no DP is providing Bonds facilities, rest all products are available at every DP.

CONCLUSION
After going through the analysis part, I come to conclude that only SHAREKHAN is

one such place or organization where a customer is fully satisfied by the varied range of services provided by them which includes Demating of Shares, Stock Broking, investments in equities, derivatives, commodities, PMS, advisory services, Mutual Funds, IPOs, best research reports. They also provide beneficial schemes even to small investors and they also have the facility of Online Demat Services.

It is a place which is providing various services all under one roof it is also known to be a Sharekhans Share Shops. The major merits or strengths of Sharekhan, being the co-operative attitude of the staff members towards themselves as well as towards the clients. They help the customers by providing correct information about the various services and about various products available with them. Thus, we can say that SHAREKHAN is one of the most prestigious financial organizations of India as far as:

Service space Attitude of staff Dissemination of information Promptness of query handling Processing time Value added services are concerned and therefore the satisfaction level of its customers is also very high.

RECOMMENDATIONS AND SUGGESTIONS

1.

HIGH CHARGES: Sharekhan is charging high as compare to other competitors in the field with due respect to account opening, brokerage and annual maintenance charges. So some cost reduction strategies should be adopted.

2.

LACK OF PUBLICITY: Sharekhan has lack of publicity in the field with special reference to Indore region. People dont know that Sharekhan

is also providing Demat facility. They think Sharekhan handles only big issues and act as only registrar and transfer agent only.
3.

LACK OF AWARNESS: People are not aware of Sharekhan. They dont know what Sharekhan is and what its services are. ADVERTISEMENT: There is a lack of advertising also. Many people dont even know about Sharekhan. So major advertising strategies should.

4.