Demat & Trading Account

What is Demat account?

A Demat Account or Dematerialised Account provides the facility of holding
shares and securities in an electronic format. During online trading, shares are
bought and held in a Demat Account, thus, facilitating easy trade for the users.
A Demat Account holds all the investments an individual makes in shares,
government securities, exchange-traded funds, bonds and mutual funds in one
place.

Demat enabled the digitisation process of the Indian stock trading market and
enforced better governance by SEBI. In addition, the Demat account reduced
the risks of storing, theft, damage, and malpractices by storing securities in
electronic format. It was first introduced in 1996 by NSE. Initially, the account
opening process was manual, and it took investors several days to get it
activated. Today, one can open a Demat account online in 5 mins. The
end-to-end digital process has contributed to popularising Demat, which
skyrocketed in the pandemic.

Trading Account

Similar to a bank account, a trading account acts as a common platform to sell or purchase
securities. Securities are purchased through a trading account, held by opening a Demat
account online, and payments are done through the linked bank account.