FINANCIAL INTERMEDIARIES

These intermediaries make sure that investors and traders experience hassle free experience in their transactions in stock market. These are interdependent on one another. They are regulated by SEBI which we discussed about earlier.

1. THE STOCK BROKER

  • Stock brokers are one of the very important intermediaries and these are corporate entities who register themselves as trading member with stock exchange and they hold license.
  • Anyone who wants to trade needs to open trading account with these brokers.
  • A trading account is an account with broker who let investors buy/sell securities
Interaction with the broker can be in following ways:
  • Meet the dealer at the broker office and explain needs and he/she will transact on behalf of investor.
  • Telephoning the broker and letting them know order details and they will execute orders on behalf of the caller.
  • Broker gives access to market through software called ' Trading Terminal ' and once they login they will be able to transact by themselves and this is popular method amongst the three options.

Services provided by Stock Broker:

  • Taking priorities of investor into consideration and transacting on behalf of them.
  • Taking orders over call and executing the same and communicating to the investor.
  • Giving access to the investor and letting them transact.
  • Giving margins for trading.
  • Providing technical support in case of any discrepancies on the software and ensuring hassle free experience.
  • Facilitating fund transfer between trading account and bank account.
  • Broker charges commission known as brokerage for the services offered by him/her.

2. DEMAT

DEMAT is like digital vault for all shares owned by you. It will have all the shares in the electronic format you bought and depository is the financial intermediary which offers the service of the DEMAT account. Broker's trading account and depository's DEMAT account is interlinked. 

NSDL ( National Securities Depository Limited ) and CDS ( Central Depository Services ) are the only two depositories who offer DEMAT account services and there is no difference between these two and are operated under SEBI strict regulations.

To open DEMAT account in depository, depository participants is needed who helps open this account. They are agents and are also under strict SEBI regulations.


3. BANKS

These facilitate fund transfer between trading account and bank account. Bank account should be in the investor's name, otherwise transfer will not be done. Multiple bank accounts can be linked to trading account where funds can be transferred from bank account but, withdrawals are permitted only to the primary bank account and for dividends also it the same case.


4. NSCCL AND ICCL

National Security Clearing Corporation Ltd and Indian Clearing Corporation ensure guaranteed settlement of transactions and these are wholly owned by NSE and BSE. 

They identify buyer and seller and match the debit/credit process. They also ensure none of the parties make any default in their payment.