Online Trading

Three different accounts are needed to start trading or Investing in Equities Online

A Demat Account

A Bank Account

A Trading Account

Demat Account :

A Demat Account is exactly like a bank account , but is used to store stocks and MFs instead of money.Demat Account is usually provided by a  Depository Participant(DP) .

In India there are two Depositories NSDL and CSDL , these two institutions provide a national infrastructure for storing of Information .

Different banks and private firms act as franchise of these two Depositories , and allow Individuals and Organizations to open Demat Account. These franchise are called Depository Participants(DP).Each DP is assigned a unique number by the Depository this is called DP Id .

When a Individual opens an account, there would be a unique account number assigned to the Indiviual and this number is called Client DP Id

For example : Sharekhan , is a  franchise of NSDL , hence it is a Depository Participant (DP) of NSDL, NSDL has assigned Sharekhan, IN300513 as its unique number.

Trading Account

Trading accounts are usually provided by members of NSE  or BSE  ( Brokers ), the two main stock exchanges in India. These are just web sites , which would allow users to transfer money from their respective Bank Accounts to their trading account and to place buy and sell orders which would be executed by the brokers.

In the absence of a Trading account , an individual can still trade or Invest in equity . He would then have to call up his broker to place order and then give him cheques and his Demat Account details when he is buying and provide Demat Debit Slips ( these are exactly like normal cheques , but instead of money , this would debit your Demat Account of specified quantity of shares of the specified company )

For Example : Sharekhan provides a trading account , which would allow users to transfer money from about 15 different banks and also screens to place buy and sell orders on the NSE and BSE . Which would be executed by the sharekhan brokers.

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