Explain the need for, and role of depository systems in secondary markets. Explain the concept of custodial services.

 The needs for depository occur mainly due the following reasons:

• Limitations of Physical Transfer
• To ensure transparency in allotment of shares
• Consolidation of folios & instruments .
• Reduced cost of transaction
• Centralised Systems in Securities Dealings

In India, a Depository Participant (DP) is described as an agent of the depository or A Depository Participant (DP) is an agent appointed by the Depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act.

The Depository System is an improvement over the age-old scrip based share trading system, where shares were held in the form of physical share certificates.

All the functions of depositories are undertaken by NSDL with the help of electronic network. The magnitude of transactions of NSDL could be judged by the volume of transactions undertaken by NSE which has gone up multifold. This is no mean an achievement, especially when ______ ___ _____ ___ _____ _____ __________ ___ ________ __________ __________.
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