Financial Intermediaries

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Financial Intermediaries


3.1 - Overview

From the time you access the market – let’s just say, to buy a stock till the time the stocks comes 

and hits your DEMAT account, a bunch of corporate entities are actively involved in making this 

work for you. 

These entities are generally referred to as the Financial Intermediaries


3.2 - The Stock Broker

The basic services provided by the brokers includes..

1.Give you access to markets and letting you transact

2.Give you margins for trading – We will discuss this point at a later stage

3.Provide support – Dealing support if you have to call and trade. Sofware support if you have 

issues with the trading terminal

4.Issue contract notes for the transactions – A contract note is a written confirmation detailing 

the transactions you have carried out during the day

5. Facilitate the fund transfer between your trading and bank account

6.Provide you with a back office login – using which you can see the summary of your account

7.The broker charges a fee for the services that he provides called the ‘brokerage charge’ or 

just brokerage. The brokerage rates vary, and its up to you to find a broker who strikes a 

balance between the fee he collects versus the services he provides.


3.3 - Depository and Depository Participants

A Depository is a financial intermediary which offers the service of Demat account. A DEMAT account in your name will have all the shares in electronic format you have bought. Think of DEMAT account as a digital vault for your share.

At present there are only two depositaries offering you DEMAT account services. They are The National Securities Depository Limited

 To open a DEMAT account you need to liaison with a Depository Participant (DP). A DP helps you set up your DEMAT account with a Depository. A DP acts as an agent to the Depository

3.4 - Banks

They help in facilitating the fund transfer from your bank account to your trading account.


Also, at this stage, you must have realized that the three financial intermediaries operate via 

three different accounts - trading account, DEMAT account and Bank account. All the three accounts operate electronically and are interlinked giving you a very seamless experience.

3.5 NSCCL and ICCL

NSCCL – National Security Clearing Corporation Ltd and Indian Clearing Corporation are wholly owned subsidiaries of National Stock Exchange and Bombay Stock Exchange respectively.

a) Identify the buyer and seller and match the debit and credit process

b) Ensure no defaults – The clearing corporation also ensures there are no defaults by either 

party.



Key takeaways from this chapter

1.The market ecosystem is built by a cluster of financial intermediaries, each offering services 

that are unique to the functioning of markets

2.A stock broker is your access to markets, so make sure you choose a broker that matches 

your requirements, and services well.

3.A stock broker provides you a trading account which is used for all market related 

transactions (buying and selling of financial instruments like shares)

4.A Depository Participant (DP) is a corporate entity that holds the shares in electronic form 

against your name in your account. Your account with the DP is called the ‘DEMAT’ account

5.There are only two depositories in India – NSDL and CDSL

6.To open a DEMAT account with one of the depositaries you need to liaison with a Depository 

Participant (DP). A DP functions as an agent to the Depository

7.A clearing corporation works towards clearing and settling of trades executed by you

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