Some of the beginners to online stock trading do not understand relationship between Share Trading account and Demat Account . In this short article lets see the relationship between Demat account , Trading Account and your Bank Account . We will also see how many trading or Demat account you can have in total .
Work Flow
Below is a short chart where I have tried to give the flow when you buy a share . click to Enlarge
Demat Account : Account where your Shares are stored in electronic form .
Trading Account : An account which is used to place orders for Buying and Selling of shares .
So Trading account is an interface between your Bank account and your Demat account , when you buy something , Trading account takes money from your Bank Account (Its already taken from your Bank account and saved in Trading account) and buys shares and stores it in your Demat account . When you Sell something , Your trading account takes back the shares from your Demat account and Sells them in Stock Market and get back the money and that goes back to your Bank account (actually you manually transfer it to Bank account from Trading account most of the times .
Question : Does any one know maximum how many demat account can one open ?
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{ 15 comments… read them below or add one }
No limit on number of DMAT account by a person.
Personally I had 4 DMat account out of which 3 are active at present (as far as I know)
Obviously I am paying for 1, rest are bouncers
@Anonymous: There is a limit on number of Demat accounts you can have.
Though I am not sure about this number, but have got to know from my broker that an individual can have maximum of 5 demat accounts on his name.
@Others: I agree with the author's view that many people do not understand the difference between the trading account and the demat account. With this, people are do not research much about which broker should they choose or what parameters should they look at other than brokerage to select a broker.
I have expressed some of my views here, probably they might help. Link – http://blog-bizzare.blogspot.com/2009/09/which-broker-to-hire-for-new-trading.html
You can have as many demat accounts as you wish to…
The only catch is, legally, you cannot apply for IPO from all the accounts. One application per PAN holder is allowed.
Theoretical knowledge is good, but doubts remain on the practical side.
1. Examples of demat and trading accounts?
2. What do we get when we open an account at, say, reliance money? Both the accounts, or just one of these?
3. Can we mix and match e.g. reliance money trading account with kotak demat account? Or is demat account not associated with any broker but directly held with NSDL?
4. For which account do we pay the various fees (per transaction, yearly etc.) ? Can we hold one and close the other e.g. if I do not want to trade for a while, can I close trading account but keep the demat account open? Will it save me significantly on annual fees?
5. Is it possible to not hold demat account but still trade? Can I get shares in paper form?
@maurya
U can mix any trading account with Dmat account, in such cases you can't do online trading (Practically), as Dmat will not be linked with online trading a/c.
Whenever you sell, you need to fill Depository receipt and give it to your trading account partner.
This is the way people uses in smaller cities, where Dmat-online trading still not SO HOT.
AS such trading account doesnt have any fee associated with them, only charge might be First time account opening and Software Charge. They earn via Brokerage
DMAT account has Annual maintance charge, custody charge etc
Now it is impossible to trade without dmat account.
Shares on Paper –(transfer)—> DMAT is possible
DMAT —-> paper is impossible
Hey all,
After reading this post, I thought I should write in little more detail abut the demat and the trading accounts.
@Smart Investor: please allow me to post this link here
Link – http://blog-bizzare.blogspot.com/2009/09/what-are-trading-accounts-and-demat_11.html
@Blog Bizzare .. nice link . Thanks
Manish
Good reaad.. quite detailed infor… so even if i take any demat account the system or the online trading firm would work in the similar manner.. ?? be it rmoney / icici / sharekhan/
@Anonymous
Yes , you are correct
Manish
yeah, no limit to the number of article.. been using two for quite some like reliance money and 5paisa.. and faced no troubles..
Great
thanks for the review .
manish
Great. Good piece of information.
Thanks Sanjay
Manish
You continue to contribute to the investment quotient of a common man who is tentative to enter the big, bad world of stocks, trading and making money.
Keep it up!!!
Thanks Mukul
Manish