Why Demat Account Is Required?

One of the fundamental requirements for trading in securities in the Indian stock market is a Demat Account. It’s in the Demat Account that shares are held in electronic or digital form. But this usage doesn’t justify why Demat Account is required?

Another subsequent question here is, who has made Demat account a fundamental requirement for all stock market trading in India? And, are there ways to trade in the stock market without the requirement of a Demat Account?

Above all, many investors still think that is Demat account safe?

Let’s answer these important questions next.

Is Demat Account Necessary For Trading?

The Demat account was a facility that was made a compulsion by the Securities and Exchange Board Of India (SEBI) in the last decade of the previous century. So, now one thing is clear, you require a Demat Account if you wish to trade, as this is a SEBI directive.

The Indian Parliament had sanctioned this order, as a bill was passed declaring that all securities market trading will be permitted only in Dematerialized format.

However, there is an exception. For those traders who are into Intraday Trading, a Demat account is not necessary as no holding or delivery of shares is actually carried out in Intraday Trading.

But apart from that, a Demat Account is required to trade in the share market.

Why is Demat Account Important?

Why did SEBI feel the need to declare that a Demat Account is required if one wishes to trade? What were the reasons that make such a strong case for Demat Account that the Indian Parliament passed a bill?

Well, the straightforward answer lies in the benefits of a Demat Account facility and in understanding the fact that Demat Account revolutionized the trading experience incredibly.

Here are some major benefits:

• Accessibility: The fact that Demat Account empowers a trader to trade anywhere anytime, without having to contact a middle man is a huge change in itself. All a trader today has to do is utilise a device such as a PC or a smartphone to trade as when required.
• Security: Since the risks of theft or misplacing of physical share is eliminated, therefore Demat Account has really enhanced the sense of security among shareholders. These limitations of physical shares were easily overcome by Demat Account.
• Global Market Access: It is through Demat Accounts that foreign investors have been able to trade in the Indian market, which helps strengthen the overall economy as foreign investments drive assets from abroad.
• Loan Availability: Demat Account holders also have the facility of availing loans against securities, which is also known as Margin Trading or Margin Funding.
• Ease Of Transfer: As there is no Human interference required in transferring of shares from one shareholder to another, hence this has led to speedy deliveries and hence accelerating the overall trading experience.

Moreover, it’s not possible to apply IPO without Demat Account, as when allotted shares begin to reflect, it’s in the Demat Account that you shall receive the holdings.

So, you just have to follow the process of Demat Account opening online within a day or two you will be able to use it to start trading.

Conclusion

Demat Account is required for all kinds of trading except in the case of F&O Intraday trading. Demat Account will also be useful if you wish to gain high profits by IPO investments. And just because SEBI has made it mandatory, doesn’t mean that the Demat Account facility has no merit of its own.

Rather, these authority’s decisions are indicators of the fact that the Demat Account is highly beneficial not just for traders but for the ones involved in the managing of shares such as the Depository bodies as well as stockbrokers.

So, without much ado, open a Demat Account today with Choice and reap all the benefits of using this facility.