The term "Demat Account" refers to a deposit made at an Indian financial institution that can be used for investing in shares of stocks and other financial assets. Securities are held electronically in a Demat Account, thereby eliminating the need for physical paper certificates.
Securities and Exchange Board of India (SEBI) is a board appointed by the Government of India in 1992 with its head office at Mumbai.
Securities and Exchange Board of India (SEBI) is a board appointed by the Government of India in 1992 with its head office at Mumbai.
The basic function of SEBI is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
SEBI has to be responsive to the needs of three groups, which constitute the market; the issuers of securities, the investors and the market intermediaries.
Demat, which is short form of dematerialization, is the process by which an investor can get stocks converted into electronic form maintained in an account with the Depository Participant.
Demat, which is short form of dematerialization, is the process by which an investor can get stocks converted into electronic form maintained in an account with the Depository Participant.
A Depository Participant (DP) is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act.
In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI.
Depository is an organization responsible to maintain investor's securities, like stocks or any other kind of investment, in the electronic form. In India there are two such organizations called National Securities Depository Ltd. (NSDL) and Central Depository Services India Ltd. (CDSL)
Investor’s wishing to open Demat account has to go DP to open the account.
Opening the Demat account is as simple as opening the bank account with any bank. As you need bank account to save your money, make cheque payments etc. Likewise you need to open a demat account if you want to buy or sell stocks.
All stocks what you possess will show in your demat account.
Investor’s wishing to open Demat account has to go DP to open the account.
Opening the Demat account is as simple as opening the bank account with any bank. As you need bank account to save your money, make cheque payments etc. Likewise you need to open a demat account if you want to buy or sell stocks.
All stocks what you possess will show in your demat account.
So you don't have to possess any physical certificates. They are all held electronically in your demat account. As you buy and sell the stocks, accordingly your stocks will get adjusted in your account.
The market regulator, the Securities and Exchange Board of India (SEBI), has made it compulsory to open the demat account if you want to buy and sell stocks.
So a demat account is a must for trading and investing.
You have to approach a DP to open a Demat account. Most banks are DP participants so you may approach them.
To have latest list of registered DP please visit websites www.nsdl.co.in and www.cdslindia.com.
A broker and a DP are two different people. A broker is a member of the stock exchange, who buys and sells stocks on his behalf and also on behalf of his customers.
If you want to sell your stocks, you need to place an order with your broker and give a 'Delivery Instruction' to your DP. The DP will debit your account with the number of stocks sold. You will receive the payment from your broker.
If you want to buy stocks, inform your broker about your Depository Account Number, so that the stocks bought are credited into your account.
Below are some of the points you need to remember while opening an online account
- Make multiple inquiries and try to get lowest brokerage trading and demat account.
- Find out about the margin they provide for day trading.
- Discuss about fund transfer. The fund transfer should be reliable and easy. Some online share trading account has integrated savings account which makes easy for you to transfer funds from your saving account to trading account.
- Know about service they provide in respect to research calls, intraday or daily trading tips.
- Don’t forget to inquire about their services charges and other hidden charges, if any.
- And also see how reliable and easy is to contact them in case if any emergency arises regarding closing or squaring off trades.
