History and Future of Demat and Trading Accounts in IndiaWe all know that Demat and Trading accounts are two different things. But how do they differ? And what is the history of Demat and trading accounts in India? In this article, we will discuss these two terms in detail and provide you with some insights into their past and future.
What is a Demat account?A Demat account is an account opened by a customer using their personal details or KYC documents. It is an electronic form of holding securities and has replaced the traditional way of holding physical shares. A Demat account allows for easy transferability between individuals, thereby reducing counterparty risk. Here are some features that define Demat: (1) ease of transferability between individuals. (2) Doing away with the need for physical delivery or possession of shares before transferring them into your custody.
What is a Trading account?A trading account is for trading in the stock market. They are used by investors to buy and sell shares in the stock market. The term “trading” does not refer to any particular activity but rather describes all activities related to buying and selling stocks/shares as well as margin borrowing from banks via their securities lending services (SL).
Dematerialization of securities.Dematerialization is the process of converting physical securities into electronic format. It is an important concept in today’s financial world because it helps to reduce paperwork and the costs associated with trading instruments such as stocks and bonds. The dematerialized version of an asset will be stored on a platform or server instead of being kept on paper or in a safe at the bank. Demat account allows customers to access their stock portfolio from anywhere through an internet browser; therefore it reduces costs associated with traveling every time you want your investments checked out!
History of Demat and Trading AccountDemat and trading accounts are two very important tools for trading in the stock market. They have been around since the early 1990s and were introduced by SEBI (Securities Exchange Board of India) in 1992. Before 1992, traders had to physically deliver share certificates to brokers when buying or selling shares on the stock market; hence they were called ‘dematerialized securities’. This concept was first introduced by Japan’s Financial Services Agency in 1981 as a way to make money more easily accessible through electronic trading platforms like BSE & NSE’s e-trading platform. The concept behind dematerialization was that multiple parties could transact at once without having to wait for delivery of physical documents like registered letters/postal orders etc. This made it possible for investors from all over India who weren’t very familiar with each others identities or addresses but still wanted to access their funds quickly without any hassle.
How did people trade before Demat?Before the advent of Demat, you could only buy and sell shares physically. This was a cumbersome process as it involved going to the stock exchange and physically carrying your share certificates with you. It was also risky because there was no guarantee that your share certificate would be delivered on time or at all. Demat accounts have revolutionized this entire trading system by bringing transparency into transactions, reducing risks associated with the physical trading of stocks and shares, etc., thereby making them more convenient for both investors and brokers alike!
How has Demat improved trading in India?Demat has made trading in India easier in the following ways:
- It has made it easier to buy and sell shares, mutual funds, and bonds. The real-time settlement system allows investors to buy or sell shares on the same day they want them to close, which reduces their exposure risk while also helping them get an earlier price when they want to exit a position.
- Traders can use this technology at any time of day, unlike some other platforms where traders have access only during specific hours (between 9:30 am-4 pm). This means that you don’t have to wait around for someone else’s order before you can execute your trade; instead, you can do so whenever there’s no conflict with another party’s order or when there isn’t enough liquidity available on the exchange floor—and still get your desired outcome within seconds!