Earlier, companies and traders used to trade with physical shares. Due to this, they faced several issues related to robbery, sign-mismatch, loss of physical shares, and many more. To get rid of these issues, the Government of India tied up with different Multinational Companies (MNCs) and introduced demat and trading accounts.
You do not require a Demat account if you only want to trade in the intraday segment. You only need a trading account for that because while trading in the intraday segment, taking the delivery of the financial instrument is not possible.
Demat Account Information – To Start Trading
Along with a Demat account, there are two more accounts you need to trade in the Indian stock market. You will need a trading account and a bank account to make any transaction in the stock market.
In a demat account, investors can store all sorts of financial securities. Irrespective of the asset class. They can store commodities, bonds, equity shares, and many more. Moreover, the Demat account is used to transfer those financial securities into another account. For this, the mediator charges a commission. The mediator is nothing but a broker.
The depository appoints a participant to handle all the investors and get their Demat accounts opened. The depository participant overlooks the functioning of the entire demat system. Starting from the process of opening to the end a depository participant is involved. Along with providing means to open a free Demat account, the DP offers various other services. The DP makes sure that there are no other
One of the best features offered by most of the depository participants is; 3-in-1 Demat account. Also, some of them offer to open a free trading account online.
To open a free trading account online you will require the following documents:
- Identity Proof
- Proof of address
- Income Proof
- PAN card
- Passport size photographs
- Canceled Cheque/Passbook.
Depository participant’s main source of income is the trading fee and the brokerage they charge on each transaction. For a one stop solution 3-in-1 account is the best option.
Brokerage Houses
A broker is an intermediary who helps in finding the right buyer for the right seller. In short, it is a link between the stock market investor and the exchanges. When you place a buy or sell order the broker is the one who takes your order and further proceeds with it. For this service, the broker charges a commission. It is called a brokerage. Some of the brokers only charge traders who trade in the derivatives segment and not for the delivery segment.
Types
● Full-Service Broker:
As the name suggests a full-service broker provides extra services to their customers. Services including, research reports, buy/sell calls, and many more. These brokers have an entire team of analysts, who give calls and prepare research reports. Along with all these services, full-service brokers provide demat and trading accounts to their clients.
● Discount Broker:
On the other hand, discount brokers do not provide any of the above-said services. They just provide a trading platform to investors. They can only buy and sell shares on this platform.
Conclusion
Discount brokers who open a free trading account prefer keeping the commission rate at zero.