Definition
Depository Participant (DP)
A depository participant is an agent of a depository (NSDL or CDSL) through which investors open demat accounts and hold securities electronically, acting as the link between investors and the depository.
In India, securities are held in dematerialised form at the two depositories, NSDL and CDSL, and investors access them via a DP, usually a bank or broker. The DP maintains the investor's demat account, credits and debits securities at settlement, and facilitates pledges, corporate actions and statements.
The DP is essential to settlement: when a trade settles, securities move between buyers' and sellers' demat accounts through their DPs and the depository. SEBI regulates DPs, and recent rules on pledge/re-pledge and direct payout of securities to client demat accounts have strengthened investor protection.
Related terms
- Clearing CorporationA clearing corporation is the entity that clears and settles trades on an exchange, becoming the buyer to every seller and the seller to every buyer through novation, and guaranteeing settlement.
- Settlement Cycle (T+1/T+0)The settlement cycle is the time between trade execution and final settlement of money and securities, expressed as T plus the number of business days, such as T+1 for next-day settlement.
- NettingNetting is the offsetting of a member's buy and sell obligations in the same security and settlement so that only the net quantity of shares and net amount of money change hands.
- Pledge and Re-pledgePledge and re-pledge is the SEBI-mandated mechanism for using securities as collateral, where shares stay in the client's demat account and are pledged in favour of the broker, who re-pledges them to the clearing corporation.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.