In a nut shell, Central Depository System is an Electronic Book Entry System to record and maintain securities and to register their transfer. In Central Depository System, ownership will be changed without physical movements of securities or execution of transfer deeds. The ownership will be transferred as soon as securities move from one account to another. CDS is purely a settlement vehicle and will not affect the trading in any manner whatsoever.

There are three elements of Central depository System.

Account Holders
Issuers / Registrars
Eligible Pledgees

Account Holders

Account Holders are divided into two categories, Account Holders and Participants. Both, Account Holders and Participants will have direct access to the CDS. Account Holders will be allowed to have a Main Account and a House Account for their beneficially owned securities. Participants, however, will be entitled to have client accounting facilities within the CDS. In addition to Main Account and House Account, Participants will be allowed to have Sub Accounts and Group Client Accounts. In short, Participants can provide Custody Services to their clients whereas, Account Holders can keep only their beneficially owned securities in CDS.

All the members of Stock Exchanges, Banks ( Both Commercial and Investment ), and DFIs are allowed to open their account as Participants whereas, Corporate Bodies such as Leasing Companies, Modarabas and Insurance Companies can open their account as Account Holders.

Issuers / Registrars

The issuers of capital whose securities are converted from physical to electronic book entry system play a significant role in Central Depository System. They will also have direct access to the CDS. After a security is declared eligible for the purpose of Central Depository System, necessary software and CDS connection is provided to that particular issuer upon signing the Issuers Agreement with CDC. The shares are entered into CDS only after proper verification by these issuers or their registrar. This process eliminates the problem of fake/duplicate/lost/stolen share certificates as issuers thoroughly check them before approving for CDS.

Eligible Pledgees

Financial institutions that lend against securities will have their account with CDS in the capacity of Eligible Pledgees. These institutions will also have direct access to CDS and will be provided with necessary connection in this regard upon signing the Pledgee Agreement with CDC. Their Clients will be able to pledge their electronic book based securities in CDS. Once the securities are pledged in the CDS, the control over those securities is transferred to the eligible pledgee in the form of pledge release / call. Nevertheless, the beneficial owner will continue to get the benefits of corporate action on pledged securities.


The Account Holders of CDC will be able to settle their transactions within the CDS through five
types of accounts, namely:

Main Account: Each Account Holder in the system will be allocated a main account by virtue of being an Account Holder in the CDS. This account will mainly be used as a transit account for movement of securities. Any security coming in or moving out of an account holder�s family of accounts will pass through this account.

House Account: Used for securities owned beneficially by Account Holders.

Sub-account (Client Account): This account is used for keeping securities belonging individually to each of the clients of an Account Holder. An Account Holder may open and maintain any number of sub-accounts he requires on behalf of his clients.

Group Client Account: This account is used for keeping securities which are beneficially owned by the Account Holder�s client. It will be used for clients who are not willing to utilize the facility of opening separate sub-accounts. The Account Holders will group all such clients in their Group account. The detailed break-up of the securities held by each client of a Group Account will be maintained by the Account Holders in their back office.

Cash Account: Each Account Holder in the system who opts to avail the Delivery vs. Payment (DVP) facility will be required to deposit relevant amount to be used for the settlement of DVP obligations.


The main operations performed in the CDS are as follows:

Deposit of existing and new securities in to the Central Depository System. Once a security is declared eligible by CDC, the physical certificates of that security will be deposited in the CDS for conversion after which they will be available for further transfers within the system. Following is the procedure to deposit securities in the CDS:

  • The Account Holder will initiate the Deposit Request by entering the details of share certificates into the system, and Securities Deposit Form.
  • CDS will generate computer printouts of the transaction.
  • Transfer Deed will be executed in favor of �Central Depository Company of Pakistan Limited�.
  • Account Holder will then send the relevant share certificates, transfer deeds, Securities Deposit Form and the computer printouts to the relevant registrar.
  • The registrar after verification will either approve or reject the transaction within five days from the receipt of the documents.
  • Registrar will update CDC nominee share holding in the Member�s Register, cancel share certificates and transfer deeds, and return the relevant documents (other then canceled share certificates and transfer deeds) to applicant account holder.

Withdrawal of securities in the form of certificates from the depository to cater for investors who prefer to have physical possession of certificates. Following is the procedure to withdraw securities from the CDS:

  •  The Account Holder will initiate the Withdrawal Request by entering the relevant details into the system, and Securities Withdrawal Form.
  • CDS will generate computer printouts of the transaction.
  • Account Holder will then send the Securities Withdrawal Form. and the computer printouts to the relevant registrar.
  • The registrar after verification of the balance will either approve or reject the transaction within five days from the receipt of the documents.
  • Update CDC nominee share holding in the Member�s Register.
  • Prepare share certificate ( Jumbo certificate ).
  • Return the relevant documents and share certificates to the applicant.

Free Transfer - Book entry transfer of securities without any associated cash movement. This is a unilateral transaction in which an Account Holder can deliver securities to any other Account Holder in Central Depository System. Although the beneficial ownership of securities changes as securities move from one account to anotherr, there is no stamp duty involved and the transfer is instantaneous.

Pledge/Release/Call - Pledging securities in favor of a lender, which can only be Released / Called by the lender. This function will greatly benefit the financial institutions by reducing risk of fake share certificates and paperwork to a great extent.

Stock Borrowing or Lending through the mechanism of transfer with or without associated money movement through the Depository System.

Corporate Action - In case of Bonus Issues, Dividend, Rights Entitlements, Sub-Division, Consolidation and any other action that changes the number of securities held in a participant�s account or involves the determination of entitlement to beneficial owners, CDC shall provide relevant details of account holders and sub-account holders to the issuer. The CDC will also provide details for the purpose of Notice of General Meetings and Other Notices / Communications.

Delivery Versus Payment - Book entry transfer of ownership of a security in exchange for payment to settle a transaction.

  • DVP is a bilateral transaction.
  • The deliverer of the securities will initiate the DVP request on CDS specifying the details of securities and payment.
  • Upon acceptance of the receiver

CDS will debit deliverer�s securities account and credit receiver's securities account

CDS will debit receiver�s cash account and credit deliverer�s cash account.

Cash only Movement - Movement of cash from one account to another with out any associated securities movement.

CDS will bring tremendous efficiency and growth in the Capital Markets of Pakistan. It will also enhance the image of our Capital Markets globally.