For the past decade or more, the stock market did move on the way to paperless trading. Use of technology has made it easy to go paperless in this age which also ended a number of troubles to the brokers as well as traders and investors who deal in the market on a regular basis. Also, for investors who were accustomed to carry a heap of stock certificates, the opening of a demat account is now necessary. Not operating a demat or depository account tends to be a stumbling stone in the way of making an investment in equities. So, it will be not astonishing that entities like spot market plus commodities futures are increasingly moving in the direction of the dematerialised mode of trading.
The best demat account or dematerialised account retains shares within the electronic format, in so doing eliminates the hassle of retaining shares in physical form.
Depository functions
A depository can be taken to be akin to any bank. It retains shares that are owned by the investors within the electronic format. An investor is needed to get an account opened with the depository, via a DP or depository participant. The depository participant forms an agent amid the investor and the depository. You will find two depositories in India like central depository services and national securities depository. A lot of banks such as SBI, ICICI, HDFC and a lot more, and brokers like infoline etc., plus institutions function in the capacity of the depository participants.
Services provided by DPs
The shares sold and purchased by you tend to be reflected within the demat account. Whichever shares you are retaining in the form of certificates are capable of being dematerialised and kept up in the form of electronic credit within the demat account. Of late, stock exchanges did promote sale and purchase of mutual fund plans over the exchange.
The depository participants, on a regular basis, offer you with the statement of your account indicating the volume of shares found in the demat account plus the deals executed for the duration of a period. The depository participants as well provide a lot of services like electronic settlement relating to trades within the stock exchanges, hypothecation or pledging of dematerialised securities against loans given by banks, facility of nomination for the demat accounts and much more.
Method to open a demat account
You are capable of getting a demat account opened with any financial institution, brokers, and with some bank. Generally, banks proffer better rates for the demat account if you have got the savings account there. But, in case you desire to choose an online stock trading, it will be very much convenient to get a trading account, and depository account opened with a similar broker or any financial institution.
The depository participants levy yearly maintenance fees, fees needed for a pledge of your securities, transaction charges meant for your debit of securities, plus many more charges levied for dematerialisation. The fees realised for depository participant services vary within the industry.