Underwriting is an insurance that the underwriter gives the organization issuing the shares – that if the shares are not subscribed by the public, the underwriter will subscribe to it. This insurance is given at a premium (fee).
In other words; Underwriters are primary market experts who promise to pick up that portion of an offer ofsecurities (Offered to public) which are not subscribed by investors.
The specialistunderwriters in the government bond market are called primary dealers.
The stock issuing organization approaches underwriting firms (institutional underwxriters) like IDBI, ICICI, UTI, etc.
Stock brokers:
Stock brokers are registered trading members of the stock exchanges. They can sell new issuance ofsecurities to investors. They put through the buy and sell transactions of investors on the platform of various stockexchanges. All secondary market transactions on stock exchanges have to be conductedthrough registered brokers.
Sub-broker:
Sub-brokers help in reaching the services of brokers to a larger number of investors. Severalbrokers provide various services such as research, analysis and recommendations aboutsecurities to buy and sell, to their investors. Brokers may also enable screen-based electronictrading of securities for their investors, or support investor orders over phone. Brokers earn acommission for their services.
Clearing members and trading members:
Clearing members and trading members are members of the stock exchange where securities are listed and traded. Trading members put through the trades for buying and selling, either on their own behalf, or on behalf of their customers. Clearing members receive funds and securities for completed transactions and settle the payment of money and delivery of securities. There is clear separation of own and customer transactions. There are ample controls and audits to ensure this separation.
Registrar & Share Transfer Agents:
Registrars & Share Transfer Agents play a vital role – they maintain the record of investors on behalf of the issuer. Every time the owner of a security sells it to another, the records maintained needs to incorporate this change.
Only then will benefits such as dividends and interest be passed on to the new owners on time.
The securities are held in a dematerialised form in the depository. The changes to beneficiary names are made automatically when a security issold and delivered to the buyer. Investor records are maintained for legal purposes such asdetermining the first holder and the joint holders of the security, their address, bank account details and signatures, and any nominations they may have made about who should be receiving the benefits from a security after their death. This is ensured in the KYC process (KYC stands for Know Your Customer)