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Difference between Demat Account and Trading Account

  • Highlights

  • Demat vs Trading

  • Demat Account stores your shares digitally

  • Trading Account helps you buy & sell shares online

  • Both Demat & Trading Account are essential to trade online

Difference between Demat and trading Account is that a Demat Account holds the shares and securities (Bonds, ETFs, Mutual Fund units, etc.) in digital mode, while a Trading Account provides the interface to buy and sell shares in the stock market. Despite the different roles they play, Demat and Trading Account work together to make online trading possible.

What Is A Trading Account?

Where Demat Account helps a person to keep their securities in a digital mode or electronic format, Trading Account means a person who buy or sell shares in the share market electronically. A trading account is basically an investment account. By a trading account, one can trade in shares and securities like bonds, mutual funds etc. This is the primary account for those who are day traders.

Demat Account vs. Trading Account

Now-a-days, if a person wants to trade in the stock market, they need to have a demat and trading account to buy and sell shares. Here, Demat account acts as a repository which keeps the shares in digital or electronic form whereas Trading account helps a person to buy and sell shares in the stock market.

Here are the main areas where a Demat and a Trading Account differ:

The main difference between demat and trading account is that a demat account is used to hold the shares in digital or electronic form whereas a trading account is used to buy and sell the shares and securities in the market.

1. The functionality of a Demat Vs a Trading Account

Today, shares are traded in digital mode, that is when you buy a share, you do not have to worry about safekeeping physical share certificates. The shares can be stored and transferred in digital mode with a Demat Account. Similarly, you do not have to be physically available on the trading floor to place your buy or sell order, this can be done through a trading account which can be accessed on mobile or laptop. The main difference between demat and trading account is that a demat account is used to hold the shares in digital or electronic form whereas a trading account is used to buy and sell the shares and securities in the market.

2. The nature of the two accounts

At any point of time, your Demat Account will show the shares and securities that you are currently holding. A Trading account will show you the transactions that you carried out in the stock market.

3. The role of the two accounts

There are two parts to the trading process. First, you need an interface to buy and sell shares from the stock market, and next, you need to have a storage space to keep those shares.

Demat Account is only a repository. It helps you take the delivery of shares when trading in equity delivery or when you apply for an IPO and get the allotment of shares. It does not help you transact in the stock exchange. For that, you need a Trading Account.

Trading Account is linked with your bank account. You can add money from your bank account to your Trading Account and vice versa. You can trade in Futures and options if you only have a trading account, since it does not involve taking delivery of shares.

Both Demat and trading account perform different functions in the online trading process. Nonetheless, they are closely integrated they make the entire trading process swift and convenient.

Additional Read: What is Demat Account

Can I have a Demat account without a Trading account?

You can open a Demat Account without a Trading Account. Sometimes an investor just want to hold the shares over long term without the intention to sell it in near term, they can open a Demat Account and store the shares. Also, while applying for IPO, a Demat Account is a necessity to take the delivery of shares on allotment, a trading account is not compulsory to apply for IPO.

Can I have a Trading account without a Demat account?

You can have a Trading Account without a Demat Account. With just a trading account, you will be able to trade in Futures and Options, which do not require you to take delivery of shares.

Charges for Demat and Trading accounts

Demat and Trading Account brings the convenience of share trading right at your fingertips. There is a backbone of technology and other resources responsible for maintaining the services and provide necessary support. Consequently, some charges are levied for availing the services of Demat and Trading Account. The key charges associated are:

  • Demat Annual Maintenance Charge (Demat AMC): It is a recurring cost associated with Demat Account to be paid annually. It is the cost for maintain your Demat Account.

  • Demat/Remat Charges: The charges levied on converting a share in physical form to digital mode (Dematerialization) and for converting shares in digital mode to physical certificate (Rematerialization)

  • Off market Transfer: Charges for transfer of shares from one demat account to the other without involving stock exchange. This can be done for gifting shares to a family member or transferring shares from one Demat Account to the other.

  • Brokerage charges: The charges levied by stockbroker for the services offered and is levied on the transactions you do in the share market. It can be a percent of the transacted value (charged by full-service broker) or a flat fee per order, independent of the transaction value (charged by discount broker).

  • Demat and Trading Account opening charge: it is the fee for opening a Demat and Trading Account. Some stockbrokers provide the option to open free account. However, Demat AMC will be applicable. For example, you can open a free* Demat & Trading Account with Bajaj Financial Securities through its Freedom Pack subscription plan, where Demat AMC is Rs.0 in 1st year and Rs.365+GST from 2nd year onwards.

Additional Read: How to Start Trading Online

Open Demat and Trading Account

You will need both Demat and Trading Account to invest and trade in the stock market. Bajaj Financial Securities Limited provides a quick and paperless way to open your Demat and Trading Account online in less than 15 minutes. You have an option to open Demat and Trading Account online for free* and start trading in share market with savings on brokerage up to 99%**. Follow the below steps to open an account:

  1. Visit the online account opening form

  2. Fill your basic details, such as Name, Phone Number, PAN number, etc.

  3. Upload your documents – Photograph, PAN Card, Signature, Proof of address, Cancelled cheque

  4. Perform an In-Person Verification (IPV) – To confirm your identity

  5. E-sign the documents online through Aadhar linked mobile number

  6. Review and submit your application

That’s it! Once your account is activated you will receive the login details and details of your Demat and Trading Account. Without leaving the comfort of your home, you can get your own Demat and Trading Account and start investing in share market.

*Account opening is free for Freedom Pack, with zero Annual Maintenance Charge (AMC) for 1st year & Rs. 365+GST from the 2nd year.

**99% savings calculated as brokerage of ₹10 (approx) charged in BFSL vs brokerage of ₹1000 calcuated at 0.10% on 5 buy & sell orders each of a volume of 2 lakh.

Demat Vs Trading Account Faq’s :

Do I need both - a Demat and trading account?

To make the transactions seamless and convenient a trading account and a demat account are required. The demat account is a repository of your financial securities but is not enough to trade. For transacting, you need to have a trading account with a brokerage house.

However, a trading account is sufficient if you are trading on Futures and options which do not require delivery of shares.

When an investor would like to just hold the shares and is not interested in trading them, a demat account is sufficient.

Who can apply for a Demat and Trading Account?

Regardless of age or residential status, anyone can apply for a Demat and Trading account.

Contrary to popular belief, age is not a criterion. When a minor investor has attained the age of 18, the depository participant may ask for Know your client(KYC) form to create a new account.

Essentially, your PAN card along with KYC form is required to open a Demat and Trading account.

Is demat account different from trading account?

Yes. A demat account is different from a trading account. A demat account is for holding stocks, bonds, mutual funds, and Exchange Traded Funds(ETFs) and other securities. It has securities that were converted from physical to electronic form or recently bought from an exchange. As shares in the Demat account are in an electronic form, with stringent authentication processes, there is no risk of theft, forgery, tampering of shares.

Whereas a trading account is for buying or selling of shares on the stock exchange. It has to be linked to a bank and a demat account to trade.

What is Demat and Trading Account?

Demat Account holds the securities (Bonds, Shares, Mutual Funds, etc.) digitally, while Trading Account is used to place orders in Share Market.

Disclaimer

Disclaimer: Investments in securities market are subject to market risk, read all the related documents carefully before investing. Visit our website for other Terms & Conditions.


Stock Broking services are provided by Bajaj Financial Securities Limited which is 100% subsidiary of Bajaj Finance Limited and registered with BSE Ltd. (BSE) and National Stock Exchange of India Limited (NSE)

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