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How to Open Demat and Trading Account?

Introduction:

Richa received a sum of Rs 25000 bonus from her employer. She wants to make more money by investing that sum in the stock market. For that, she needs to complete certain formalities. The foremost step includes opening a Demat account and trading account. But what are these accounts? Are both Demat account and trading account necessary? What steps are to be followed? Let's understand.

What is a Demat Account?

A Demat account is where you can store your shares or other financial securities in an electronic form. You will get a Demat account number when you open a Demat account. The Demat account allows you to maintain the records of your transactions in securities electronically. A Demat account works in the same way as a bank account.  Whereas the bank account holds your money and allows you to deposit and withdraw funds, and the Demat account holds the shares and other financial securities on your behalf.

What is a trading account?

A trading account is required to conduct stock trading activities and can be opened with a stockbroker. You can trade the shares of a listed company electronically using a stock exchange mechanism.  You will be given a unique trading ID with this account, which will allow you to trade in stocks.

Are both Demat account and Trading account different?

The trading account and Demat account differ from each other in the following manner;

  1. A Demat account's primary purpose is to hold securities in an electronic form, whereas a trading account is used for trading securities like shares on the stock exchange
  2. To use a bank account analogy, the Demat account functions as a Savings account for the shares, whereas the trading account is similar to a current version for the stock market trading.  Both these accounts can be accessed from anywhere online

Additional Read: ICICI Direct- 7 things to know about a Demat account

Steps to open a Demat account:

  1. To open a Demat account, you have to contact a depository participant and fill the required form. On websites of depositories, like Central Depository Services (India) Ltd (CDSL) and National Securities Depository Ltd (NSDL), you will find a list of depository participants (DP) authorised to provide you with the Demat account services
  2. Fill the account opening form with copies of your ID and proof of address
  3. Sign a contract with the DP which outlines your rights and responsibilities as an investor and DP. Remember that you have the right to ask for a copy of the agreement you signed and  the associated charges schedule
  4. The DP will open your account and issue you with a Demat account number, also referred to as a Beneficial Owner Identification Number (BOIN)
  5. Make a comparison of the brokerage rates as well as the services provided
  6. To open an account, contact the shortlisted broker
  7. Fill an account application form
  8. Submit your KYC documents which would include your ID and proof of address
  9. Allow the verification procedure to be completed for your application
  10. Get your trading account information and begin trading

Steps to open a Trading account:

Both trading account and the Demat account are the essential elements of stock market investment and Trading. While it is easy to open a Demat and Trading account online, you must approach the stock markets with a thorough understanding of the markets. Stock investments are subject to market risk and should be accompanied by comprehensive research.

Disclaimer

ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.

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