A depository is a technology driven ________. It has no paper work relating to share certificates, transfer and forms.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → electronic storage system
Option (1) screen-based trading system — Incorrect. Screen-based trading is the buying and selling of shares through computer terminals in brokers’ offices. It is a way of trading, while a depository stores securities.
Option (2) electronic storage system — Correct. A depository keeps securities in electronic form, as a bank keeps money. It is a technology driven electronic storage system, so there are no paper certificates or transfer forms.
Option (3) online order-matching system — Incorrect. Matching orders at the best bid and offer price is done by the computer in screen-based trading. A depository does not match orders; it only keeps securities.
Option (4) electronic fund transfer system — Incorrect. Electronic fund transfer is the fast movement of money that rolling settlement needs. A depository holds securities, not money.
NCERT (Pre-rationalised Edition): “Depository Just like a bank keeps money in safe custody for customers, a depository also is like a bank and keeps securities in electronic form on behalf of the investor. In the depository a securities account can be opened, all shares can be deposited, they can be withdrawn/ sold at any time and instruction to deliver or receive shares on behalf of the investor can be given. It is a technology driven electronic storage system. It has no paper work relating to share certificates, transfer, forms, etc. All transactions of the investors are settled with greater speed, efficiency and use as all securities are entered in a book entry mode. …” |