Explain the following terms/concepts
(1) Depository system
Ans.(a) Under Depository System, securities / shares are held in an electronic: form, The Depository System maintains accounts of the shareholders, enables transfer, collects dividends, bonus shares, etc. on behalf of the shareholder. This system is also called as ‘Scripless Trading System’.
(b) In India the Depository System was introduced by passing the Depository Act in 1996. The Depository System resembles the Banking system in many aspects.
Ans. (a) Dematerialization is the process wherein share certificates or other securities hold in physical form are converted into electronic form.
(b) These shares / securities are credited to demat account of an investor which has to be opened with a depository participant.
Ans. (a) Rematerialization is the process of conversion of electronic holdings of securities into physical certificate form.
(b) For rematerialization, the investors have to fill up a Remat Request Form (RRF) and submit it to the depository participant.
Ans: (a) In financial terms, Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Some financial assets are fungible while some are not fungible.
(b) The securities held In electronic form are fungible. They are interchangeable, substitutable and cannot be distinguished from each other.
Ans. (a) An International Securities Identification Number (ISIN) uniquely identifies a security. The ISIN code is a 12-character alphanumeric code that serves for uniform identification of a security.
(b) ISIN’s in any country are allotted by National Numbering Agency (NNA) of that country.