A trading account gives
a mighty hand in facilitating a smooth and safe way of sale and purchase of
shares and stocks.
Trading manually is fast becoming
a thing of the past and is being pushed further away by online stock trading.
Paper based instruments had inherent problems and with the expansion of the
Indian capital market, the magnitude of large scale trades and settlements,
were making it impossible to manage as long as trading in stocks and other
securities were being conducted using shares.
India then moved on to demat
system, in which bookkeeping is done electronically, where shares and
securities are de-materialised and are held and the buying and selling of
shares became very easy and risk free, thus invalidating the hassles and
problems associated with physical share certificates.
From then onwards, demat account
has been synonymous to online stock trading. To open a demat account you need
to approach a Depository Participant (DP), and they are the banks, financial
intermediaries, stock broking firms etc. who will hold securities and shares on
your behalf electronically. Your DP will also provide you with a unique number
called BO ID (Beneficiary Owner Identification Number), which will be required
at the time of transaction.
However, a demat account’s
function is to hold and transfer of shares and securities, but to actually
initiate transaction of sale and purchase of shares, you will have to open a
trading account. All you have to do is mention the name of the company from
whom you want to buy or sell your shares and the price agreed by you. Then you
can contact your broker by online placement of order or calling your broker
over the phone, and the broker in turn executes your order on your behalf.
After a transaction is completed, your shares will get either debited or
credited to your demat account.
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