If you are opening a demat account, you may be getting a bit overwhelmed with all the talk about linking your demat with your trading account. To throw light on this, this blog will provide you with a step-by-step guide, which will help you do so.
According to the Securities and Exchange Board of India (SEBI), anyone who wants to trade or invest in securities must open a demat account and a trading account. Moreover, both these accounts must be linked. But before we explain how they should be linked, let us explain the purpose behind having a demat account and a trading account.
Why opening a demat account is required
The main purpose of a demat account is to hold the shares and other securities in an electronic format. It is a bit like your savings bank account, which holds all your savings. The only difference is that a demat account holds your investments related to financial markets, and not your savings.
Why a trading account is needed
A trading account is meant to help you buy and sell shares. For a trading account to do that, it should be linked to your demat account as well as your bank account. Only if these accounts are linked will you have a hassle-free trading experience. Otherwise, you may face issues. Now, let us discuss how to link a demat account to a trading account.
Steps to link a demat account to a trading account
- Select a stockbroker: The first thing you should do is select a broker with whom you will open a trading account. You need to ensure that the same broker can also open your demat account. It is a great idea to open a demat account and a trading account with the same broker.
- Get a trading account opened: Now, you have to get a trading account opened with the broker. You will be required to fill out an applicable form and provide the necessary documents to open a trading account.
- KYC completion: The know your customer (KYC) process must be completed based on the regulations. This will require your PAN card and address proof, such as a passport, Aadhar card, etc.
- Get demat and trading accounts linked: Now, you have to get your demat and trading accounts linked. For this step, your broker will either give you a form or his online portal to complete the linking process.
- Share the details of your demat account: In this step, you will be filling out the demat account linking form. Or, you can also share the details of your demat account using the online portal of your broker. This will require you to provide the number of your demat account, depository participant’s (DP’s) ID, etc.
- Verification or submitting the form: In case you did the linking online, you need to verify and link your demat account online. However, if you are filling out a paper form, you need to submit it to your broker with the required documents.
- Confirmation of linking: Your stockbroker will send you a confirmation once your demat account is linked with your trading account. Once that happens, you can start buying and selling securities through your broker’s trading platform in a seamless manner.
If you remember, we earlier said that you should have your demat account and trading account with the same broker. You should not have your demat account with one DP and your trading account with another broker. In most cases, the broker will not permit you to link that demat account with your trading account because doing so may cause the broker operational problems. Often different entities involved in the stock market (a DP, broker, etc.)
have different terms and conditions. Therefore, it makes sense to open your demat and trading accounts with the same provider.
Also Read: The Potential of Borrowing Options in Margin Trading: Benefits, Risks & More
