Stock Market |
March 30What is the difference between a demat account and a trading account?
Demat Account
It is the short form
of depository beneficiary account, it is used to hold the securities in the
dematerialized form.
This kind of account
does nothing but acts as a repository where all the entities bought from Stock
Market India are kept in the electronic format.
Securities like
bonds, debentures, equity shares, preference shares or any securities having
ISIN can be held in a Demat Account. Securities having ISIN can be held in
Demat Account even when they are not listed on any Stock Exchange. Client
opting for equity segment (cash market) in Trading Account are mandatorily need
to have a Demat Account.
The Demat Account has
to be opened with Depository Participant (DP) of either CDSL or NSDL.
TRADING ACCOUNT
In stock trading, the
term trading account refers to an account through which an investor can buy and
sell securities. The trading account acts as a connector between you, your bank
account, your demat account, and the stock market. This is used solely for the
purpose of trading.
Trading Account can
be opened only by a stockbroker and can be used for both trading as well as investment. The
shares purchased through Trading Account are held in Demat Account and shares
sold through trading account are transferred from Demat Account to the Stock
Exchange through Stockbroker.
The following points
describe the basic difference between the trading account and demat account in Equity Trading India
Demat Account- Used to store actual and
other securities you buy in the market.
Trading Account- Operates in the same way as current bank account and serves as a link
between your demat and bank account.
Demat Account- To hold listed and unlisted securities electronically.
Trading Account- To place an order for trading in securities
Demat Account- Any stockbroker who is also a DP can open a demat account
Trading Account- Any Stock Broker / Broker Member of recognized Stock Exchange.
Demat Account- Approval of SEBI (Securities Exchange Board of India), NSDL (National
Securities Depositories Limited), or CDSL
Trading Account- No approvals required.
Demat Account- Multiple demat accounts with one DP with purpose.
Trading Account- Only one Trading Account can be opened with one Stock Broker.
Demat Account- Anybody who wishes to invest in the stock market and store shares in
electronic form.
Trading Account- Anybody who deals in cash as well as derivative segments
Demat Account- Acts like a bank locker, where the securities bought are sold and
securities sold are withdrawn.
Trading Account- It is used for placing buy or sell order.
Demat Account- Electronically (through internet login) as well as physical
instructions. A Stock Broker through limited purpose POA given by the Clients.
Trading Account- Online, Offline (through telephone call and trade, Email, personal
visit, etc.).
Demat Account- Account opening charge that varies from Rs. 0 to Rs. 1200 depending on
the broker. Also, the annual maintenance charge is also levied.
Trading Account- There is no mandatory charge for the trading account.