What is demat and trading account?

Demat Account

Demat refers to Dematerialised, Means demat account is like bank account for stocks, and it is used to hold securities in dematerialised (electronic) form. Demat account is used as a bank account where stocks bought are deposited in and stocks sold are taken from.

Demat Account services are provided by share brokers, financial institutions and banks. And they charge different fees for demat account like account opening fee, annual maintenance fee, transaction fee and other charges with taxes. Documents required for opening demat accounts are PAN card, Address proof, Income proof, Photo, Cancelled cheque, Cheques for account opening and AMC (annual maintenance charges).

Trading Account

Trading Account is used to place buy or sell orders in the stock market it is like buying and selling platform for stocks, this is an interface between demat and bank account.
Note- Now a Days Demat & Trading account are linked to each other and open together

    Step 1- First you have to fill up an account opening form with a depository participant (DP) or Agent of Depository. Depository participant can be banks, brokers, Financial institution etc. All Depository Participants details are available on the CDSL (Central Depository Services (India) Ltd and NSDL (National Securities Depository Ltd).

    Step 2- Along with form you need photocopies of identity proof and address proof.

    Step 3- Investor have to sign an agreement with depository participant, this agreement contains rights and duties of investor and Depository Participant and Investor gets the copy of agreement.

    Step 4- After all the documentation Depository Participant open an account and give investor the demat account number. This demat account number is also called beneficial owner identification number (BOID). Investors all purchase and investment will credit in this account and sell of securities will be debited from account.

    For Opening Demat & Trading Account investor need to fill account opening form and KYC form with proof of identity and address.

    After all the documentation investor will get his/her demat & trading accounts details.
    Investor can have multiple demat & Trading account with multiple DPs and Investor don’t have any compulsion to open demat account with his broker.

    Documents required for Opening Demat & Trading Account

    For opening demat & trading account you need Passport size photo, Pan card, Adhaar Card, Bank Statement and Cancel Cheque.
    Benefits of Demat & Trading Account

    Easy access & monitoring-Demat account is operated completely online which facilitate easy access and monitoring of the stock trading and holdings from anywhere.

    Corporate gain–if you have demat and trading account and stock in holding you can get benefit from corporate actions like bonus issue, right shares,buy back and stock split and these are automatically updated in demat account.

    Quick and convenient–Since all process in online one can buy, sell or transfer securities in few seconds.

    Safety–demat and trading account is authorised so it is safer and best option to eliminate risk associated with physical stock holding like theft,loss or damage.

    Loan Facility- If you have holding in your demat account than you can apply for loan against security.