What is a demat account and how does it work? MintGenie explains
demat account serves as the initial step before entering the stock market. Understanding what a demat account is serves as a fundamental prerequisite to grasping its functionality. The term 'Demat' stands for dematerialisation, a process wherein physical securities are transformed into electronic form.
Through a demat account, traders can hold, transfer, and transact securities without the need for physical certificates. This transition has made trading a safer, faster, and more efficient method of managing securities and executing trades. Demat accounts are primarily utilised for investing in shares and securities electronically, enhancing accessibility for account holders by eliminating the need for physical share certificates.
Since the inception of demat accounts, investors and traders have experienced significant benefits, including reduced clearing times, mitigation of fraud cases, decreased brokerage rates, and a notable surge in trading volume, particularly in the equity market. In India, demat accounts simplify share trading by holding shares in electronic form. They facilitate easy access to shares and securities, converting physical share certificates into electronic format.
Opening a demat account incurs certain charges by stockbrokers for managing the account. Similar to bank accounts, demat accounts require linkage with a trading account for optimal functionality. When you place a 'buy' order for a company's shares via your trading platform, your depository participant forwards the order to the stock exchange.
The exchange matches your order with a corresponding 'sell' request from another trader or investor. Once matched, the exchange sends the order to a clearance house, settling the trade. At the end of
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