In the decade gone by, the stock market tends to adopt the paperless mode of trading. It is consideredas a secure and safer way for the investors as well as traders across the market. In relation to investors who had to maintain a huge load of stock certificates, getting opened a demat account is now compulsory. Not maintaining demat or depository account tends to be the largest entry hurdle to making an investment in equities. So it can be taken as a surprise that even more entities – spot market plus commodities futures happen to adopt the electronic mode of trading.
Dematerialised or a demat account retains shares within the electronic format, hence doing away with the hassle of retaining shares in physical form. A demat account makes an essential for trading in EFTs and stocks. It does not involve any stamp duty.
HOW TO OPEN
It is necessary to know how to open demat account, so below is given the procedure for the same.
You are capable of getting a demat account opened with any financial institution, any bank or with brokerage firms. Normally banks proffer enticing rates for the demat account if there is your savings account opened with them. Nevertheless, in case you desire to opt for stock trading through online mode, it will be very much easy for you to get a trading account and depository participant account opened with similar financial institution or broker.
Depository participants realise yearly maintenance fees, deal charges in relation tothe debit of securities, charges meant for a pledge of securities plus many more charges like charges taken for dematerialisation. The fees levied for depository participant services vary within the industry.
A depository happens to be akin to any bank. It retains shares that are owned by the investors within the electronic format. The investor is needed to get an account opened with the depository via a DP or depository participant. The depository participant acts as an agent amid the investor and the depository. You will come across two types of depositories in India that is central depository service and national securities depository. A lot of reputed banks, institutions, and brokers work in the capacity of the depository participants.
Facilities provided by DPs
The shares sold and bought by an investor happen to be reflected in his demat account. Any shares you will be retained in physical form are capable of being dematerialised and kept up through electronic credit within the demat account. Of late, stock exchanges have made possible sale and purchase of mutual fund plans over the exchange.
The depository participant on an intervallic basis offers the investor with the statement of the account indicating the number of shares found in his demat account and deals in a specific period. The DPs as well provide a lot of services like electronic settlement pertaining to trades within the stock exchanges; hypothecation or pledging of electronically held securities in lieu of bank loans, facility of nomination for demat accounts and a lot more.