Definition
A Depository Participant (DP) is a registered intermediary that acts as a link between investors and depositories like NSDL and CDSL. A DP helps investors open and manage Demat accounts, where securities are held in electronic form, keeping your securities safe and making buying, selling, and transferring them easy and hassle-free. While a broker provides a Trading Account to execute orders on exchanges like NSE or BSE, a DP provides a Demat Account to securely store those securities.
Example
When you sign up with the Choice Brokerage firm to start investing, they open a demat account for you. Here, the Choice Brokerage firm acts as a Depository Participant (DP). It acts as a link between you and the depository (let’s say CDSL). Whenever you buy a share, Choice instructs CDSL to add the shares to your account; whenever you sell a share, it instructs CDSL to debit the shares from your account.
You never interact with the CDSL directly; Choice does it on your behalf.
Caution
A Depository Participant helps manage and hold your securities electronically, but investors should understand the charges and services offered by the DP before opening a Demat account.