Saturday, 20 October 2012

Opening Demat Account all Need to Know

I am writing to help those members who would like to start investing in stocks but need to get all the relevant information at one place and in a simple format, to get started. So, if you are already an investor in stocks, please ignore this post

To start investing in stocks is really simple; you just have to open two accounts: a demat account and a trading account. We have given below what these accounts mean and how to open them.

Demat account

Demat is simply short for Dematerialized account. Stocks and shares are stored in a non-physical form in this account. Just as you require a savings account with a bank for storing your money, you would need a Demat account to hold your shares in a dematerialized form.

How to open a Demat account?

You can open a Demat account with any registered depository participant (DP).
To get a list of registered DPs,you may want to visit the NSDL ( or CDSL ( websites. Once you have chosen your DP, your DP will help you complete the formalities of opening an account. This typically involves the following steps:

NSDL(National Securities Depository Ltd) is connected with NSE Trades
CDSL(Central Depository Service India Ltd) is connected with BSE Trades
In India we have only these 2 depositories.

-> Filling an account opening KYC form(Know Your Customer)
-> Signing an agreement with the DP, which is meant mainly to protect your interest
-> Submitting supporting documents on the proof of your identity and address.

Trading Account

In order to trade in stocks (i.e. buying and selling) one needs to open a trading account. This is done through a stock broker who is a member of a stock exchange.

How to open a trading account?

Follow these steps to enroll as a client of a broker:
1) Identify a Trading Member: Find out the list of trading members from NSE's website 

2) Contact the Trading Member: The investor should contact the trading member either over the phone or make a personal visit to the trading member's office.

3) You have to inform the trading member whether he or she wishes to trade through the internet (if the trading member provides internet trading facility) or directly over the phone.

4) You have to provide the trading member certain simple and standardized details as part of regulatory requirements and sign a Member Constituent agreement. The Member will help you complete these formalities.

5) Trading member will issue you a unique client ID.
6) You can now commence trading. 

With warm regards,                                                                                                 Abdul Zelani.