All about Demat and Trading Account: All you need to know
WHAT IS A TRADING ACCOUNT?
When a company lists on the stock market, its shares become available for trading on the stock exchange. Earlier, the exchange had an open-outcry system. In the mid-90s, the stock exchanges adopted the electronic system. This means, all trades were conducted electronically. Simply put, you didn’t have to go to the counter and place an order physically. You could do it through a computer, which would verify the details, the market price, and process the trade.
For this reason, you need a special account through which you can conduct transactions. This is called the trading account. Without one, you cannot trade in the stock markets. You register for an online trading account with a stock broker or a firm. Each account comes with a unique trading ID, which is used for conducting transactions.
WHAT IS THE DIFFERENCE BETWEEN DEMAT AND TRADING ACCOUNTS?
Yes. A trading account is used to place buy or sell orders in the stock market. The demat account is used as a bank where shares bought are deposited in, and where shares sold are taken from.
Let’s use an example.
You have Rs.100 in your wallet. You go to a shop and tell the seller that you want a packet of chips, you check the price, and finalize the transaction. Then, you take the money out of your wallet and give it to the seller. In this case, the wallet acts as the demat account, while you act as the trading account.
HOW TO OPEN AN ONLINE TRADING ACCOUNT?
Just like the demat account, a trading account is a must for investing in the stock market. This is because to trade in the stock markets, you need to be registered with the stock exchange. Stock brokers are registered members of the exchanges. They traditionally conduct trades on your behalf.
Most often, stock broking firms have thousands of clients. It is not feasible to take physical orders from every client on time. So, to make this process seamless, it is advisable to open an online trading account. Using this trading account, you can place buy or sell orders either online or phone, which will automatically be directed to the exchange through the stock broker.
- Select Broker or Firm.
- Compare brokerage rates and services provided
- Get in touch with selected broker for account opening.
- Fill account opening and KYC forms. Submit along with proofs of Identity & address.
- Application verification process.
- Get trading account details.
- Place buy/sell order.
HERE’S HOW YOU OPEN A TRADING ACCOUNT:
- First, select the stock broker or firm. Ensure that the broker is good and will take your orders in a timely manner. Remember, time is of utmost importance in the stock market. Even a few minutes can change the market price of the stock. For this reason, ensure that you select a good broker.
- Compare brokerage rates. Every broker charges you a certain fee for processing your orders. Some may charge more, some less.
- Some give discounts on the basis of the amount of trades conducted. Take all this into account before opening an account. However, remember that it is not necessary to choose a broker who charges the lowest fees. Good quality brokerage services provided often may need higher-than-average charges.
- Next, get in touch with the brokerage firm or broker and enquire about the account opening procedure. Often, the firm would send a representative to your house with the account opening form and the Know Your Client (KYC) form
- Fill these two forms up. Submit along with two documents that serve as proof of your identity and address.
- Your application will be verified either through an in-person check or on the phone, where you will be asked to divulge your personal details.
- Once processed, you will be given your trading accounts details. Congrats, you will now be able to conduct trades in the stock market
HOW TO TRADE USING DEMAT ACCOUNT?
- STEP 1:- Link your trading and demat accounts. This way you won’t have to keep supplying your demat account details for every transaction.
- STEP 3:- The exchange will process your order. It will verify the details of the transaction, the market price, the availability of the shares in the market, and so on. It will also check the details of your demat account that is linked to your trading account. This is especially so in case of a sell order.
- STEP 2:- Place an order through your online trading account. This could be a market order, a limit or buy order, or an after-market order. If your brokerage allows you to place orders through the phone, then you will need to supply your trading account details.
- STEP 4:- Once the order is processed, the shares will be either deposited in or debited from your demat account.
CAN YOU TRANSFER SHARES USING DEMAT ACCOUNT?
Nomination: Yes, nomination is possible. You can have a nominee of your choice by filling up the details in the account opening form. This enables the nominee to receive the securities after the death of the holder of the demat account.
Between DPs: Transfer of shares is possible between demat accounts held with different DPs. You need to fill the Delivery Instruction Slip Book (DIS) and submit the same to your DP for transferring your shares from another demat account. However, you need to check whether the central depositories are same or not (CDSL or NSDL). If both of them are different, then you need an INTER-Depository Instruction Slip (Inter DIS). If they are same, then you need an INTRA Depository Instruction Slip (Intra DIS).
Do try to submit that DIS when the market is on. Then, the date of submission of DIS and date of execution of DIS would be the same. Otherwise, there may be a delay. You may also need to pay the broker some charges for the transfer.
You can open your trading account with this brokers.
- ICICI Direct
- HDFC Securities
- Kotak Securities
- Axis Bank Securities
- A C Choksi
- Action Financial Services
- Acumen Capital Market
- Aditya Birla Money
- Aditya Trading Solutions
- Almondz Global
- Anand Rathi
- Angel Broking
- Anugrah Stock
- Axis Direct
- Beeline Broking Limited
- Bezel Securities
- BMA Wealth Creators
- Bonanza Online
- CD Equisearch
- Comfort Securities
- Edelweiss Capital
- Emkay Global
- F6 Finserve
- Fyers Securities
- HDFC Securities
- Hedge Equities
- ICICI Direct
- IDBI Capital
- IFCI Financial Services
- Indiabulls Securities
- Interactive Brokers
- Kotak Securities
- LFS Broking
- LKP Securities
- Master Trust Capital
- Motilal Oswal
- Networth Direct
- Nirmal Bang
- Paterson Securities
- Phillip Capital India
- Procon Capital
- Reliance Securities
- Religare Securities
- Samco Securities
- SBICAP Securities
- Share Shoppe
- SHCIL Services
- SMC Global
- Sunlight Broking LLP
- Swastika Investmart
- Tata Securities
- Trade Walla
- Tradeplus Online
- Ventura Securities
- Zen Securities