Know the Types of Trading & Demat Accounts Online in India | Espresso

Various Types of Trading Accounts & Demat Accounts

Whether it is to hold, buy, or sell shares in the capital market, an investor needs to open a Demat account and a trading account with their chosen depository participant (DP). A Demat account allows investors to hold their shares and securities. For trading in India, however, an investor needs to open a trading account first. Before they begin trading in India, every investor needs to acquaint themselves with the different types of trading accounts and the types of Demat accounts that are catered to address the varied demands of the investors.

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Types of Demat Accounts

A Demat account holds the shares and securities in Dematerialised (electronic) form. There are three common types of Demat account online:

  • Regular Demat Account: Indian citizens interested in trading in India can open a regular Demat account. The charges to open a Demat account and other costs involved may vary depending on the volume held in the account, the type of Demat account subscription, and the terms outlined by your DP (Depository Participant).
  • Repatriable Demat Account: Amongst the different types of Demat accounts online, the repatriable Demat account allows funds to be transferred abroad and so is often used by NRIs. However, to open a Demat account that is repatriable, the investor needs to have an NRE bank account linked with it.
  • Non-Repatriable Demat Account: Also for the NRIs, the non-repatriable Demat account is one where the funds cannot be transferred abroad. However, to open a Demat account that is non-repatriable, an NRO bank account needs to be associated with it.

Before you open a Demat account, it is important to know the benefits and types of Demat accounts so that you can choose the one that offers the most convenience to you. You can read up on different types of Demat account online for a quick comparative analysis.

Types of Trading Accounts

You cannot buy or sell stocks and securities without a trading account. If you only wish to trade in futures and options, then you can only open a trading account with your DP without having to open a Demat account. However, before you open a trading account to enable trading in India, you need to acquaint yourself with the types of trading accounts.

Following are the types of trading account online: -

  • Equity and Derivatives Trading Account: When you open a trading account for equity and derivatives, you can use it to trade in stocks, futures, and options. However, with this type of trading account, you can neither take the delivery of stocks nor subscribe to an IPO. You will need to open a Demat account if you want to take the delivery of shares. However, if your trading in India is only restricted to futures and options, this trading account is sufficient.
  • Commodity Trading Account: You can open a trading account for a commodity with a commodity broker that is registered with a recognised commodity exchange in India. You need to open a trading account separately for commodity trading, because formerly, the regulatory bodies for commodity and equity trading in India were separate. However, in 2015, even the commodity trade was brought under the regulation of SEBI. Regardless of the merging, the practice of separate types of trading account online continues.
  • Discount Broking Account: Amongst the different types of trading account online, this one is the most cost-effective as it enables investors to trade high volumes at minimal costs involved. With this account, the investor can only undertake the execution of trades. Additional perks such as advisory or research services are not offered with this trading account.
  • Full-Service Trading Account: Aside from simply executing trades, this trading account offers a host of services. These include advisory services to connect with financial experts when in doubt or research services that assist investors in examining the capital market conditions.

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FAQs

There are different types of trading accounts to address the diverse investment needs of investors.

Following are the types of trading account online:

  • Equity and Derivatives Trading Account: for trading in stocks, futures, and options.
  • Commodity Trading Account: Used for trading in commodities.
  • Full-Service Trading Account: Offers other services alongside the basic execution of trades such as advisory and research services.

Following are the types of Demat accounts:

  • Regular Demat account: used by Indian citizens for trading in India.
  • Repatriable Demat Account: Used by NRIs to transfer shares abroad. This Demat account needs to be linked with an NRE bank account.
  • Non-Repatriable Demat Account: Used by NRIs who need not transfer shares abroad. The non-repatriable account needs an NRO bank account to be associated with it.

For trading in India, you need a trading account along with a Demat account. The steps to open a trading account online are simple:

  • Step-1: Choose a reliable DP. For seamless trading, it is recommended to open a trading account with the same DP that has your Demat account.
  • Step-2: Submit the duly filled trading account opening form
  • Step-3: Complete your KYC
  • Step-4: Wait till the verification is complete, following which you will have to sign the agreement
  • Step-5: You will receive a unique customer ID to access your trading account