Chapter 1 · Introduction to Financial Markets
The four institutions
Broker, exchange, depository and clearing corporation — what each one does and why they are separate.
Between you and a share there are four institutions, each doing exactly one job. The separation is deliberate: it means no single failure loses your money.
How a market is put together
| Institution | Its one job | In Nepal |
|---|---|---|
| Broker | Places your order on the exchange | SEBON-licensed brokers, via TMS |
| Exchange | Matches buyers with sellers | NEPSE |
| Clearing | Works out who owes what after trading | Handled through the settlement process |
| Depository | Holds the shares, in your name | CDSC, via your Demat account |
Why the depository is separate from the broker
This is the protection that matters most. Your shares are not held by your broker — they sit in a depository account in your name, and the broker only has permission to trade them.
If your broker went out of business tomorrow, your shares would still exist, still be yours, and still be recorded at CDSC. You would open an account with another broker and carry on. That is why the extra account is worth the paperwork.
Settlement
Execution and settlement are different moments. When your order matches, the price is fixed. Settlement is the later transfer that actually moves shares to the buyer and money to the seller, a set number of trading days afterwards.
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