Earlier, the process of equity investment was complex, and people had to visit the stock exchange to buy and sell securities. This process does not give security on the transactions on the people’s behalf. To overcome this situation, demat accounts have come into the role.
The demat account will introduce the transformed and the revolutionized securities trading. You can easily trade in the stock market using the demat account and make the process more convenient, secure, quicker, and efficient.
It is essential to invest in the demat account if you want to invest your money in the securities of the stock market. Read the following information in this article to know more about the demat account.
What is a demat account?
Knowing the demat account is the step toward understanding how the demat account works. Demat account is mainly used by traders to store, transfer, and transact the securities without handling the physical securities. With the help of the demat account, trading has become a quicker, safer, and more efficient way of storing securities and executing trades.
This account is mainly used for investing in securities and shares in electronic format. In simple words, a demat account is meant to convert the shares certificates from physical to digital format and offers excellent accessibility to the account holders.
How does the Demat account work
- Demat account works in a simple process, whereas the share and the securities of the account holders, are stored in electronic form.
- These accounts are mainly used for investing in shares in digital form.
- Demat accounts similarly work as the other bank accounts. Demat accounts must be linked with the trading account, to perform it to its complete potential way.
- Your DP (depository participants) forward your purchases order to the stock exchange when you purchase the shares through the trading platform
- The exchanges are then matched to the purchase request with the other investors or traders corresponding to the sale request.
- Once your buy order is matched, the stock exchanges send the order to the clearance house and settle your trade.
- Once the transactions are appropriately settled, the number of shares purchased by you are credited to your demat account at the end of the trading day.
Integration of trading and savings account with demat account
Trading, Demat, and the savings account all three accounts work separately, but if we link all accounts together, it will give smooth trading. It is good to link the three accounts before one begins the transacting in the equity and the securities. The very first step to open the demat account is to haves a savings account.
Then the demat account is credited and holds the securities that are funded by the savings account.
Conclusion
This article will deliver you the information on the demat account, along with the integration concept with the other account. Also, you will learn about how the demat account work by reading this article.
