After Covid-19 and lockdown, the number of IPO applicants has been rising. Technology and digitalization have made it easier to apply for IPOs and invest your money in the stock market. The ease of applying for IPO and investing has made many ignorant while making such applications. There are various sections to fill out at the time of IPO application. One such column is "DP Name."
Let's understand the DP name, advantage, and application of this so that you will be aware of such details next time you apply for IPO.
The article will cover:
- What is DP
- Advantages of Depository System
- Functions of Depository Participant
- DP in IPO Application
- What is DP ID
- The difference between Depository and Depository Participant
- Conclusion
- FAQs
What is DP?
DP is the acronym for depository participant. As per the definition in law, a DP is an entity registered with SEBI under sub-section 1A of Section 12 of the SEBI Act. A Demat account, a trading account, and a bank account are required for applying for the IPO.
The depository participant manages the trading account, and the depository manages the Demat account. Specific securities are credited to the investor's Demat account in exchange for the money invested in the transaction, which is carried out through exchanges.
A depository is a business that stores your securities and offers related services. Securities cannot be kept in a physical locker because they are dematerialized or electronic. It is stored in the depositories' Demat account. In essence, the depositories store the securities traded on stock exchanges.
In India, there are two different kinds of depositories:
- Central Depository Services Limited (CDSL)
- National Securities Depository Limited (NSDL)
The NSDL is supported by the National Stock Exchange (NSE) and other financial institutions. On the other hand, CDSL is supported by the Bombay Stock Exchange (BSE) and other financial institutions.
You and the depository are connected through the depository participant. All the depositories are listed with SEBI and the authority on the capital markets.
Advantages of Depository System
- De-materialization: De-materialization is the process of getting physical certificates converted into electronic balances. An investor planning to dematerialize its securities must have a DP account. The client has to deface and surrender the certificates registered in its name to the DP.
- Easy Exchanges: Shares lost all their distinguishing characteristics, such as folio numbers, when they were dematerialised. Securities of the same class became identical through de-materialisation, enhancing their interchangeability. Since different identities do not need to match before a trade, it has decreased exchange costs and increased trade speed.
- Transfer for Free: The exchange of securities between depositories takes place via a secure electronic system and is free of charge. Additionally, since shares are transferred electronically, they do so immediately, even though the final settlement takes T+2 days to complete.
Functions of Depository Participant
- A DP creates the investor's account, which is necessary to trade on stock exchanges.
- The shares are temporarily moved from the seller's account to the broker's account when you place a sell order, and the broker then delivers the shares to the buyer. DP performs the process of re-materialisation and de-materialisation of securities.
- Stock exchange transactions are carried out in conjunction with depositories.
The depositories serve as the vault where the securities are stored, but they are not in direct contact with either the investor or the issuing companies. Any institution, from banks to brokers, can be a depository participant.
DP in IPO Application
There won't be any confusion when filling out the IPO application regarding the DP name once the distinction between the depository and the depository participant has been clearly understood. The depository participant's name is the DP name. The box labelled "DP name" must be filled out with the broker's name. The Depository, DP ID, and DP account come before the DP name. You must select NSDL or CDSL in the depository section.
What is DP ID?
The depository participant is given a number, or DP ID, by the depository. The DP ID is typically the first eight digits of the Demat account number. The 16-digit Demat account number and the DP ID are different numbers.
It is simple to recognise the Demat account numbers provided by NSDL and CDSL. Demat account numbers provided by NSDL begin with "IN," whereas those provided by CDSL start with a numeric digit.
The difference between Depository and Depository Participant
Dematerialised financial securities are kept in depository locations. A Depository Participant (DP) is referred to as an Agent of the Depository (by law). It is in charge of maintaining ownership records up to date and facilitating the trading of dematerialised securities. They act as a go-between for investors and the depository. A contract between the two parties under the Depositories Act governs the relationship between the DPs and the depository.
Conclusion
Applying for an IPO has become more straightforward, thanks to digitisation. Extensive details, however, might make the procedure a little tricky. It is simple to fill out the form once you know the duties of the depository participant and the depository. Information on the roles and responsibilities of depository participants makes filling out an IPO application quick and effortless.
Frequently Asked Questions (FAQs)
Q. How can I find my DP name?
Whether your account was created with CDSL and NSDL is indicated by the field DP name in an online form. Using the 16-digit DP number can, you can locate your DP name. While NSDL uses an alphanumeric combination with the first two alphabets and the remaining 14 digits, CDSL uses a 16-digit ID number.
Q. What is required to write in the DP name?
The depository participant's name is the DP name. The box labelled "DP name" must be filled with the broker's name. You must select NSDL or CDSL in the depository section.
Q. What is the DP name for Upstox?
DP ID of 81800, Upstox is a Depository Participant (DP) of central depositories CDSL. View the RKSV CDSL Membership information. Your Demat account is held by CDSL (Central Depository Services Limited) and NSDL (National Depository Services Limited), two central depositories in India.
Q. What is a DP ID?
A Demat account number is a particular 16-digit account number given to the owner of a Demat account by the depository participant to conduct trading via electronic mode.