Benefits of Electronic Settlement through CDS


Following are some of the benefits of electronic settlement of securities through CDS:

Reduced workload and manpower requirements due to paperless settlement.
Instantaneous transfer of ownership. 
No stamp duty on transfers in CDS.
No risk of damaged, lost, forged or duplicate certificates. 
No impact in case of sudden increase of settlement volumes. 
Instant credit of corporate entitlements (bonus, rights and new issues).  
Paperless environment (no traditional vaults).
Secure custody of securities.
Substantial reduction of paperwork during book closure.
Convenient pledging of securities.
Substantial reduction in time & capital investments.
 
 
CDS Elements
 
The Elements of CDS are:
Participants / Account Holders
Issuers
Eligible Pledgees
These elements have a defined role in the Central Depository System as the system is driven by them without direct involvement of CDC on a day-to-day basis. CDC, however, keeps the system under its surveillance to ensure its smooth functioning and confidentiality.
 
Account Holders in CDS are divided in two categories:
 
1. Participants: are allowed to keep their beneficially owned securities in CDS and provide custody services to their clients as well.
2. Account Holders: are only allowed to keep their beneficially owned securities in CDS.
All the members of Stock Exchanges, Banks (Both Commercial and Investment), and DFIs can open their account as a Participant whereas, Corporate Bodies and Qualified Private Investors can open their account as an Account Holder.
 
The companies or Issuers of capital whose securities (both equity & debt) are converted from physical to electronic securities play a significant role in CDS. The physical securities are converted into electronic book entry securities only after proper verification and approval by these Issuers in CDS. This process eliminates the problem of fake certificates as securities are thoroughly checked by the Issuers before approval for CDS.
Financial institutions that lend against securities can join CDC in the capacity of Eligible Pledgees.
Transactions handled by CDS
 
Deposit of Securities
Transfer of Securities
Pledging of Securities
Pledge Release
Pledge Call
Withdrawal of Securities
Corporate Action