Trading accounts has become one of the most discussed topics nowadays. We can hear its name from any age group, which are able or interested in saving and earning money. It’s a platform where one invests and earns. But we know the future is unpredictable in the same way trading is too, there are chances of losing too.
In the stock market the trading account has a separate value, because it’s a mandatory part to have while trading in the stock market. One of the best things it provides is security and pace to trading. It makes the selling /buying of securities easier.
In the past traders had to follow an open outcry system. This system was not easy and time taking too, as it involved hand signals /verbal communication and in fact physical appearance of traders to place the buying /selling decisions. But the electronic trading system transformed the whole trading process. And when the market accepted the electronic trade the whole interference of the open outcry system disappeared.
It provided pace and many other features to the trading culture, like now traders can do online trade easily from any part of the world. Traders are not required to catch up for trading. All a person has to do is to register themselves for trading and have to hire a broker to do trading on their behalf if they want to. And all other activities/operations are managed by the broker. In this kind of trading, all the registered trading accounts have a unique trading ID. That ID is required to perform trading in the modern trading system, as an ID card is required in school and every organization in the same way.
Types of Charges Included in Trading Account -
- 18% GST On brokerage, DP charges, exchange transaction charges and Auto square-off charges.
- Physical delivery of derivatives = 0.05%of contract value
- BSE exchange transaction charges = 0.00345% for all groups except R, SS, ST, ZP(1.0%)X, XT, Z(0.1%)IF, IT, M, MS, MT, TS(0.00275%)
Trading Charges Explained
Securities/commodities transaction tax
It’s a tax imposed by the government during the transaction on the exchanges. It's implemented on both the buying and selling side when trading equity. But it's charged Only on the selling side while dealing with intraday or with F&O.
Transaction / Turnover Charges
Its Charged by exchanges (NSE, BSE, MCX) depending on the value of your transactions.
Some transaction charges have been revised by BSE in XC, XD, XT, Z and ZP groups to ₹10,000 per crore (XC and XD have been merged in to a new group X w.e.f 01.12.2017)
BSE has also revised transaction charges in SS and St groups to ₹1,00,000 per crore of gross turnover.
Call & Trade
Additional charges of ₹50 per order are implemented :
A) for orders placed through Zerodha support/dealing desk.
B) intraday (MIS/BO*/CO) positions squared off before market closing by Zerodha RMS team.
*For Bracket orders, if the entry order is executed in multiple trades, stop-loss /target orders will be placed separately for each trade and all charges including call & trade for auto square-off will be billed per executive order.
These charges are implemented by the government of India stamp act 1899 for transactions through instruments on the stock exchanges and depositories.
- NRI brokerage charges
- ₹100 per order for future and options
- 0.1% or ₹200 per executed order for equity (which is generally lower).
- For a non-PIS account, 0.5% or ₹100 per executed order for equity (which is generally lower).
- Revised charges are applicable from March 1st, 2022: for PIS account – 0.5%or ₹200 per executed order for equity (which is generally lower). ₹500+GST as yearly account maintenance charges (AMC).
It’s a tax imposed by the government on the services provided. Its imposed 18% of (brokerage +transaction charges)
It is charged at ₹10 per crore by the Securities exchange board of India (SEBI) for regulating the markets.
DP (Depository participation) Charges
At Choice, ₹10+GST per scrip (irrespective of quantity), on the day is debited from the trading account when stocks are sold. This is charged by the depository (CDSL) and depository participant (DP).
- ₹30 +GST per pledge request
- AMC (Account maintenance charges) ₹300/year +GST charged quarterly
Corporate action order charges
₹20 plus GST will be charged for OFS /buyback /takeover /delisting orders placed through the console.
Off-market transfer charges
₹25or 0.03%of the transfer value (which is generally higher)
Physical CMR request
First CMR request is free₹20+₹100(courier charge) +18%GST for subsequent requests.
Payment gateway charges
₹9+GST (not levied on transfers done via UPI)
The following information is based on a particular organization and can vary from others.
A. Free Equity Delivery – In this kind of investment, all the equities which are delivered (NSE, BSE) are free. Their brokerage charge is 0%.
B. Intraday and F&O Trades – In this kind, of investment, the charges per investment can be ₹20 or 0.03%of per placing order during the trade. Whether its Intraday trades across equity, currency and commodity trades.
C. Free Direct MF (Mutual Funds) – In this kind of trade all the mutual funds taking place directly are free. They don’t have to pay any hidden or extra commissions rather than trade. It has 0% commission & DP charges.
A trading account is a form of record or document which helps during the trade but also contains information related to trading, like, it contains all the transactions which took place in a trading period of a year or month. It includes the information regarding the commodities which were sold/purchased and also between whom the trade took place. It gives a summarized data of trading and its results. The question comes to mind: trading account is which type of account? The answer is simple: it's an investment account used to store the securities bought online via using a trading app.
Pros and Cons of Trading Account
a. It easily takes money from your account to start trading. It directly features to move money and allows buying the investment securities.
b. It provides a wide network of no-fee ATMs.
C. It provides various online features like online research and online tools for better trading.
d. Its fee structure is too low for various banking services, like minimum and bank overdrafts.
a. In it the returns are not guaranteed because market conditions are unpredictable.
b. It's not mandatory that the value of a fund should remain the same. It can increase or decrease as well due to investment and market effects.
c. In it if you hire a financial advisor, it can charge some fee on you, for they derive that they provided you.
d. Generally they don’t lend products like vehicles, previous loans, and mortgages like banks.
e. They have limited office services like you can not withdraw cash or can not go for cashier checks
Here some steps are given to guide you while opening a trading account :
- At first just after visiting select the stockbroker or firm. Ensure the working of brokers regarding your deal. One should select brokers very cautiously. Because Mark at can change within seconds so when selecting the broker one should be very smart.
- Then compare the brokerage rates of the brokers. Because the broker charges various fees to various orders. Some brokers charge more and some charge less.
- Some brokers provide discounts according to the number of trades conducted. One should keep the listed points in mind before choosing a broker for themselves or for their trade-in future. But one should not be allured by the low brokerage charges because sometimes if you need good quality brokerage then you should surely have to pay more than the average fees.
- Get in touch with the broker or brokerage firm to know more about opening a trading account. The firm can send their representative at your doorstep for various formalities regarding the opening of trading accounts.
Documents Required for Opening a Trading Account
The documents that are required for the opening of a trading account are:
Proof of identity
One should have to represent their basic documents for opening a trading account which can be a PAN card, Voter ID card, passport, driving license, bank attestation, IT returns, electricity bill, telephone bill, ID card with applicants photo(issued by the central or state government) and from its departments, statutory or regulatory authorities, public sector undertakings (PSUs), scheduled commercial banks, public financial institutions (PFI), colleges affiliated to universities, or some professional bodies such as ICAI, ICWAI, ICSI and bar Council, etc.
Proof of address
It’s the second most important document required while opening a trading account. One should have to represent their address proof to continue the further process of opening a trading account. It includes some basic documents such as ration card, passport, Voter ID card, driving license, bank passport or can be a bank statement, some of the verified copies of persons residential electricity bill, persons residential telephone bills, leave and license agreement or agreement for sale, the self-declaration by the high court or the Supreme Court judges, identity card or a document with the address issued by the central government and its various departments statutory or regulatory authorities, public sector undertakings (PSUs) scheduled commercial banks, public financial institutions, some colleges which are affiliated to many universities, and some professional bodies too such as ICAI, ICWAI and bar Council or much more.
How Does a Trading Account Work?
The trading account works as a link between the Demat account of the investor and the bank account of the investor. And when an investor wants to buy shares, he/she can place the order easily with the help of his/her trading account.
After this the required transaction goes for processing in the stock exchange organization. And if after the verification the trader gets approval, he/she will be allotted the number of shares applied for and the amount for those shares will automatically be deducted from his/her account which they have linked for trading.
A process much similar to this is followed in the process of selling equity shares. The investor places a sale order (let’s assume it of 100 shares) with the help of the trading account they have created. It goes for further processing in the stock exchange firm. And when the order is executed the required number of shares would be deducted from the account of the trader and an equivalent sum to the shares is credited in their account, which they have linked for trading automatically.
Demat account is related to saving /storage or repository, while the trading account is related to trade /transactions and much more.
- A trading account generally helps us to buy shares that are available in the stock market.
- A Demat account works like a repository /storage to store the shares that you have purchased in the digital format.
They both have different features, different workings, and different natures too. Usually, the Demat account shows the shares and securities that we are holding at any point during a period of time. But the trading account shows the transactions we have made in the stock market till the present time and information regarding them like amount, number of shares, with whom the trade was made, and much more.
Participation of Both Accounts in Trading?
They both are an important part of the online trading of stocks. Because in the beginning we purchase shares from the stitch exchanges with the help of trading accounts but when they are allotted we need to keep them secure in a j role in the transactions. One can do trading even without a Demat account. But a trading account is a must to have if one wants to perform trading. Trading account links with your bank account, so one can add money from the bank to the trading account easily.
Both trading and Demat accounts have different roles in the online trading process. But their integration in trading makes the whole process safe and convenient.
Is It Possible to Have a Demat Account without having A Trading Account?
Yes, one can open a Demat account even without having a trading account. Because sometimes the investor only wants to store the shares for a long time rather than sell them. Such investors can store their shares in their Demat accounts easily.
Is It Possible to Have a Trading Account without having A Demat Account?
Yes, one can have a trading account even without having a Demat account. If a person has only a trading account, he /she can trade in futures and further options provided in online trading, which do not require the trader to take the delivery of the shares.
The above information is collected from various sources and can vary from firm to firm. So please ensure before implementing yourself.
- A trading account is the most essential instrument to perform trading. It summarizes information about a person's present and previous trades. Without it trading is not possible.
- The trading account has some charges implemented on it like, STT, ETC, Stamp duty, and DP charges.
- A trading account has some penalties involved in it too: auto square-off charge, intraday, GST, and much more.
- Charges explained - securities/commodities transaction tax, transaction/turnover charge, call/trade charges, stamp charges, SEBI charges, pledging charges, DP charges, and much more.
- We got to know how to open a trading account with the help of a broker and how to choose a perfect broker for ourselves.
- DOCUMENTS required for opening a trading account are like PAN card, passport, residential proof, etc.
- A trading account works as a link between the bank account and the investor's Demat account. When an investor receives the required shares after approval the trading account automatically debits an equivalent amount to shares.
- Both the trading account and Demat account are far different from each other where one helps in purchasing and the other helps in storing shares.
- Both the accounts have their own value and importance while trading online.
- And one can have an account from both without having the alternate one.