A Demat account with a bank or any financial institution is what a broker need to do online share trading. It has to be noted that a free Demat account or free trading account are same. Any investor willing to buy or sell stocks online need to have a Demat account or a trading account. You can open a Demat account for online share trading with any bank or financial institution offering the service. This bank or the financial institution will convert your physical security holdings into electronic (Dematerialized) holdings.
How to Open a Demat Account
Now a days, most banks have the facility to open Demat account. You will have to submit following documents to open a Demat account:
- Tax Identification Number
- A canceled Cheque
- Identification proof
- Address proof
This Demat account is linked with your bank account. You can easily transfer funds from your bank account to your Demat account for online share trading.
All online trading and transactions that take place through this Demat account is handled by depository participant (DP). All share brokers / stock brokers, brokerage companies and R&T agents register under the SEBI act to handle share trading transaction.
How to Do Online Share Trading with a Demat Account
A Demat account can help you do online share trading in following ways:
- Transfer of Shares and Settlements - A Demat account is opened with a bank registered with a depository. The depository handles all the transfer and settlements. You just have to provide an
- Receipt of Corporate Benefits - A Demat account is credit with all securities entitlements like bonus and rights. Just choose the right option in the share application form. This account forwards all cash benefits like dividends and interest directly to you and not through the depository. MICR code in Bank details in your Demat account ensures credit of cash transactions to your respective bank account without any mistake.
- Dematerialisation of Shares - The bank in which you hold your Demat account can arrange to convert your physical holdings into electronic form at your request. Just lodge the share certificates with the bank accompanied by a Dematerialisation Request Form (DRF).
- Rematerilialisation - The bank in which you hold your Demat account can help you convert your electronic shares back to physical shares.