Market Participants in Securities Market

• Market participants include individual retail investors, institutional investors (e.g., pension

• Market Participants in Securities Market include buyers, seller and various intermediaries
between the buyers and sellers. Some of these entities are briefed below:

1. Stock Exchanges
Stock Exchanges offer a trading platform where buyers and sellers can carry out transaction
in already issued securities. Stock markets such as NSE, BSE and MSEI are nationwide
exchanges. Trading occurs on these exchanges through electronic trading terminals which
attribute anonymous order matching. Stock exchanges also appoint clearing and settlement
agencies and clearing banks that manage the funds and securities settlement that arise out
of these trades.
2. Depositories
Depositories are institutions that hold securities (like shares, debentures, bonds,
government securities, mutual fund units) of investors in electronic form. By means of a
registered Depository Participant, Investors open an account with the depository. They also
provide services related to transactions in the securities held in dematerialized form.
There Are Two Depositories In India That Are Registered With SEBI At Present:
Central Depository Services Limited (CDSL), and
National Securities Depository Limited (NSDL)
3. Depository Participant (DP)
A Depository Participant (DP) is an agent of the depository through which it interfaces with
the investors and provides depository services. Investors were enabled depository
participants to hold and transact in securities in the dematerialized form.
While the investor-level accounts in securities are held and maintained by the DP, the
company level accounts of securities issued is held and maintained by the depository.
Who Can Register As A DP?
With the approval of SEBI Depository Participants were appointed by the depository.
Scheduled commercial banks, Public financial institutions, foreign banks operating in India
with the approval of the Reserve Bank of India, state financial corporations, custodians,
stock- brokers, clearing corporations /clearing houses, NBFCs and Registrar to an Issue and
Share Transfer Agents complying with the requirements prescribed by SEBI, can be
registered as a DP.
4. Trading Members/Stock Brokers & Sub-Brokers
Trading members or Stock Brokers a registered members of a Stock Exchange. They assist
buy and sell transactions of investors on stock exchanges.
All secondary market transactions on stock exchanges have to be basically conducted
through registered brokers of the stock exchange.
Trading members can be individuals (sole proprietor), Partnership Firms or Corporate
bodies, who are permitted to become members of recognized stock exchanges subject to
completion of minimum practical needs.
 A sub-broker is an entity who is not a member of Stock Exchange but who acts on behalf of a
trading member or Stock Broker as an agent for assisting the investors in buying, selling or
dealing in securities all the way through such trading member or Stock Broker with whom he
is connected.
5. Authorised Person
Authorized person is any person (individual, partnership firm, LLP or body corporate), who is
appointed by a stock broker or trading member as an agent to reach out to the investors
spread across the country. A stock broker may appoint one or more authorized person(s)
after acquiring precise previous consent from the stock exchange concerned for each such
person. The approval as well as the appointment of authorized person(s) is for a definite
segment of the exchange.
6. Custodians
A Custodian is a body that is charged with the accountability of holding funds and securities
of its large clients, characteristically institutions such as banks & insurance companies. In
addition to safeguarding securities, a custodian also settles transactions in these securities
and keeps record of corporate actions on behalf of its clients.
It Aids In:
Maintaining a client’s securities and funds account
Collecting the benefits or rights accruing to the client in respect of securities held
Keeping the client informed of the actions taken or to be taken on their portfolios.
7. Clearing Corporation
Clearing Corporations play a vital role in protecting the interest of investors in the Securities
Market. Clearing agencies ensure that members on the Stock Exchange meet their
obligations to deliver funds or securities. These agencies act as a legal counter party to all
trades and guarantee settlement of all transactions on the Stock Exchanges. It can be a part
of an exchange or a separate entity.
8. Clearing Banks
Clearing Bank acts as a significant mediator between clearing members and the clearing
corporation.
Every clearing member needs to maintain an account with the clearing bank. It is the
clearing member’s accountability to ascertain that the funds are available in its account with
clearing bank on the day of pay-in to meet the obligations arising out of trades executed on
the stock exchange.
In case of a pay-out, the clearing member receives the amount in their account with clearing
bank, on pay-out day
9. Merchant Bankers
Merchant bankers are bodies registered with SEBI and act as issue managers, investment
bankers or lead managers. Investors were enabled depository participants to hold and
transact in securities in the dematerialized form. They are single point contact for issuers
during a new issue of securities.
10. Underwriters
Underwriters are mediators in the primary market who undertake to subscribe any portion
of a public offer of securities which may not be bought by investors. They fulfill a significant
function in the primary market, providing the issuer the ease that if the securities being
offered to public do not draw out the desired demand from investors, they (underwriters)
will step in and buy the securities. When the underwriters make their guarantee at the initial
stages of the IPO, it is called hard underwriting. Soft underwriting is the commitment given
once the pricing is resolute. The shares that transferred are more often than not placed with
other financial institutions, thereby restraining the risk to the underwriter. Soft underwriting
also comes with a part that offers the option to exit from the commitment in the event of
certain events happening. The risk in rigid underwriting is much higher than in soft
underwriting.