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Stock Market Participants (Basics) - NSE, BSE, CDSL, NSDL, Depositary Participant, Stock Broker|#11 - YouTube
Channel: Asset Yogi
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Press the bell icon while subscribing to the channel
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So that you will get the notification of the latest finance videos
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Namaskar, my name is Mukul and you are welcome to another
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video of Asset Yogi's master investor series. Friends, in this video,
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we are going to talk about the stock market players or if we say, the participants
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Many people think that this process is very simple
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There is one stock exchange, some companies are listed there
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Buyers and sellers trade their shares among themselves
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This process seems very simple to investors and traders
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But many intermediaries are involved in the background
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But as an investor or traders, we feel handicapped when
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we hear terms and we don't know the exact meaning of them.
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For example, what is a depository participant? What is a depository?
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What is a clearinghouse? What is a clearing member?
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What is a trading member? What is a clearing bank?
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Sometimes you hear registrar, share transfer agent, lead manager.
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So what are the roles of these agencies?
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We will learn this in this video
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I hope after watching this video, you will not feel handicapped
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So stay tuned with the video
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Friends, if you want to learn stock investing
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Then you can follow our master investor series
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which is absolutely free of cost. You will find the playlist link in the description.
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Other than this, a very common query comes to us
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that if we want to invest or trade in shares then for that
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where should we open our Demat account?
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Then I would recommend that you can open your account with the discount broker
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Where brokerage charges are minimal and the delivery charges are zero.
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You will find the recommendations and links of where to open a
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demat account in the description
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Other than this, if you have any stock market-related query
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If you need an initial hand-holding
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Then you can contact us on our WhatsApp number.
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9292924848
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With that, you can also contact us on our email id
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which you will get on your screen.
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Some of you all want to invest
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but don't have time to research about the investment
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Then also you can contact us on our WhatsApp number
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First, let's understand the basic players
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The first is a stock exchange where your companies are listed
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Like ICICI Bank, Asian Paints, HDFC Bank
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Reliance, TCS, L&T, Infosys
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All these are some popular companies that are listed on the National Stock Exchange
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and Bombay Stock Exchange. So we call them listed companies
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And when their stock is issued initially when the initial public offering comes
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We call them issuers. So how is the trade done in these companies?
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So here, there are two types of players.
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The first is investors who purchase the shares for long term
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The second is traders who buy the shares for the short term
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How many types of investors and traders are there?
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The first is retail investors. The general public like you and me
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The second is institutional investors. This means mutual funds,
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insurance companies, Foreign Institutional Investors
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A huge amount of money of institutional investors is invested here
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That's why we can also call them market makers
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The next is corporates. Companies can also invest in
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other companies' stocks. Now how this transaction is done?
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On one side, it is a buyer and on the other, it is the seller
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The buyer will transfer the money in the name of the seller. The seller will transfer the
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shares to the buyer. And this transaction will be facilitated on the stock exchange
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You can consider stock exchange as a kind of a market like you can
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buy or sell in the vegetable market. Likewise, you buy or sell the shares on the stock exchange
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As we all know there are two main stock exchanges in India
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The first is the National Stock Exchange and the second is the Bombay Stock Exchange
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Now verbally this transaction sounds very simple
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The money is transferred from the buyer to the seller and the shares are
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transferred from the seller to the buyer. But is this transaction that simple?
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See, some questions are arising here. The first is that the shares are transferred
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to the buyer, where are they getting stored?
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See, we talked about the Demat account in some of our previous videos
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where your shares are stored but which agency is this that stores them?
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The second question, if the buyer is transferring the money to the seller
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What is the guarantee that the seller will transfer the share to the buyer?
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Or the buyer will transfer the money to the seller.
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Who will take this guarantee?
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How the counterparty risk is managed here?
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Will the stock exchange guarantee it?
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No, the stock exchange will not take this guarantee.
Other intermediaries come here
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Now, how do these other intermediaries work?
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How does the whole process work in the back end?
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We will understand this
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Direct trading is not done on the stock exchange.
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Buyers and sellers cannot trade directly on the stock exchange
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The stock exchange says that we cannot manage these many transactions alone
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So they appoint some trading members
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Buyers and sellers communicate with their trading members
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So for example, the trading member took the trade of the seller
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And transferred it.
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All the things are being done online here. It will go to the stock exchange
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Now see, what's happening here, assume the buyer says that
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I want to buy 5000 shares of any company but this seller wants to sell
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only 2000 shares of that company. Then the stock exchange have to
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bring the remaining 3000 shares from another seller
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So this is an automated matching system on the stock exchange.
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But these orders are collected by trading members
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One trading member is from the buyer's side and the other one is from the seller's side
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Now, the second question that I asked you was that
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where do our shares get stored?
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They are not stored on the stock exchange. One more agency is
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there for this which is called depository
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The National Stock Exchange has promoted a depository
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which is called NSDL
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National stock exchange and some banks have promoted this
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Similarly, the Bombay Stock Exchange has promoted the CDSL
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along with a few other banks. So these are the two
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main depositories where your Demat account exists
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and your shares are stored there.
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So if 2000 shares are to be transferred from the seller to the buyer
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Then they go from the Demat account of the seller
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to the Demat account of the buyer
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No physical movement of shares is involved here.
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You can consider a depository as a bank like you open a bank account in a bank
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Similarly, you can consider your Demat account is opened with the depository
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where your shares are located. So all these transactions and its
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responsibility is of the depository. Transferring the shares from the seller's account
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to the buyer's account. So because the transactions happen this much here
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So the depository also says that we cannot manage it alone.
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So buyer and seller aren't directly involved with any depository
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Here comes another participant called depository participant.
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And we also call it DP in short form. You may have heard this term very often
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So what the depository participant is doing?
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He has taken the trade of the seller and now 2000 shares are to be
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transferred from the Demat account of the seller to the Demat account of the buyer
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And depository participant has informed the depository about the trade
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In this way, the movement of your share happens
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Now the third question, we talked about the counterparty risk
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How will the buyer make sure that he will get the shares if he has given the money?
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And how will the seller make sure that he will get
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the money if he has transferred the shares?
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Here, the stock exchange doesn't take the guarantee. The clearinghouse
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takes the guarantee here. See here, the clearinghouse becomes the seller
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for the buyer and becomes a buyer for the seller.
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This means clearinghouse is taking the guarantee as a seller
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to transfer the shares to the buyer and it is giving the guarantee to the seller
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that we are your buyer, we will give you the money, we are providing a guarantee
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Now, how do they provide the guarantee? For this, it appoints clearing members
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or custodians. Who are these clearing members?
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They interact with your buyer and sellers
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So here also, the clearinghouse is not directly involved
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with the buyers and sellers.
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The number of transactions is very high here also
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So the intermediaries are involved here also.
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The clearing members or custodians come in between
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So there is one clearing member or custodian from the buyer's side and one from
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the seller's side. So how does the clearinghouse take the guarantee?
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The clearing member or custodian it appoints tells him for the requirement
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of some margin. It says that how much soever transactions you are doing
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Make them deposit the money of about 10 to 15% higher in the clearing account
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So if default happens then the margin will help to recover the money
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This clearing account is opened in the clearing bank
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These clearing banks are impaneled with the clearinghouse
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So there are very few banks
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For example, the clearinghouse
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that is promoted by the National Stock Exchange is NSE Clearing
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The clearinghouse of the Bombay Stock Exchange is ICCL
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There are some impaneled banks of them
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Like NSE Clearing has 13 banks impaneled at present
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So whoever is the clearing member or custodian has to open their account in
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these clearing banks. Now you may think that this transaction has become very complex
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But it is not so complex for the investors like you and me
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Because all the participants that you are seeing
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Depository participants, trading members, or clearing members
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This responsibility lies on the head of your broker
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So he can perform all these responsibilities alone
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Or he can outsource any responsibility
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For example, if your broker is a depository participant
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and along with that, he is also your trading member
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But he is not your clearing member
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Then he will appoint some other agency as the clearing member
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But these things will happen in the back end. You will not find out about them
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Similarly, the buyer's broker will also do all these things for you
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You just have to do the transactions through your broker
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You just have to open your Demat or trading account with your broker
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But we should know this whole process
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So we talked about the main participants of the secondary market
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So all these agencies are regulated by the one who we call the regulator
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That is the Securities and Exchange Board of India
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We also call it SEBI in short
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Like the RBI regulates the banking system
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Reserve Bank of India
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Similarly, SEBI regulates the stock and bond market
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And SEBI decides all the laws and the punishment
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if any agency does any type of fraud
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So that punishment is decided by the SEBI
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So we understood the secondary market. Now we will understand the primary market
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Whenever a company, any private limited company
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wants to be public, wants to get listed on the stock exchange
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Then it brings their Initial Public Offering which we call IPO in short
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So understand some agencies here, what is their role?
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Let's say this is an issuer company. Issuer company meaning the one
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who is bringing its IPO and wants to bring their shares in public
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What are the transactions here? Issuer company is giving their shares to the public
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And in exchange, it wants to raise some money
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It is a very simple transaction. It will happen on the stock exchange
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But when the company is bringing their issue initially then we have to do due
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diligence there. They have to appoint some agencies
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And which agencies are these? The first is the registrar to issue which mainly does the
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record-keeping that which shareholders are there. And the second is
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share transfer agent. Once the registrar issued the shares in the name of the shareholders
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After that, the share transfer agent, assume the share gets sold
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After that, the name on the share gets changed. This is the responsibility
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of the share transfer agent. Generally, one agency manages all these
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We call it the registrar and transfer agent.
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If any company has issued the bonds
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And interest is to be paid
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Then what the company does is it goes straight to the registrar
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And generates the list of all the shareholders
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And who has how many shares
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And how many bondholders are there and who has how many bonds?
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According to that, the interest or dividend is paid.
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And when this IPO process is done then who manages it
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The lead manager manages it. Who is the lead manager?
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It can be an investment bank or we also call it a merchant bank
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Sometimes we also call it underwriter. We will discuss the IPO process in detail
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in the coming videos. So that's all in this video
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I hope by watching this video you get to know about the stock market participant
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What are their roles and responsibilities?
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If you liked this video then like and share it with your friends and family members
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Tell them about the master investor series
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If you have any suggestions related to the video or the channel
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Then you can comment below.
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And press the bell icon.
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Let's meet in the next informative video
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Till then keep learning, keep earning
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and be happy as always
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