What is A Demat Account

Demat Account is given to the Investor while registering with broker or sub broker. Demat Account is provided with an Account number. This Account would be used for all the transactions later on. Demat Account is used to keep the shares safe which we bought in the Exchange (BSE or NSE). In earlier days before the commencement of Demat Account investors were given relevant Documents for the shares they bought. And those documents (or) materials had to be kept safe with so much care. These documents had to be given to the buyer when selling. There was a problem of misusing these documents. During those days people were finding ways to change the name on the documents and selling those shares without knowing to the actual owner of particular shares. During those days cheaters were playing role. So SEBI planned to use Demat Account in order to prevent the misusing of share Documents. This Demat account is very secure than Documents. In this way all the shares will be stored in the Demat Account in electronic form. These electronic shares will be secured by Internet password and transaction password. Shares cant be transferred to third person with out entering these passwords. Now no one can sell or transfer the shares with out the knowledge of a share holder. When we buy shares, they will be added to the Demat Account Automatically. When we sell, shares will automatically be transfered from your Demat Account to Buyer’s demat account.

What is a Trading Account

Where To Buy Shares

Well, we understood what is a share, But where to buy shares from? Do we need to go to company directly to buy shares from particular company? No, that is not the process. There is an organization which controls all the functions and actions of the shares and is called as SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA). SEBI protects the interests of investors in securities and promotes the development of the securities market through appropriate regulation. Under the SEBI control there are two main exchanges are there in which all the transactions and exchanges of shares occur. They are BSE (Bombay Stock Exchange) and NSE(National Stock Exchange). Owners of the company who wants to offer shares to the public at the initial will put an application to the SEBI. Then SEBI go through the company prospectus and past history of the company and sales and product details of that company and gives permission to offer shares to the public. The process of offering shares to the public initially is called IPO(Initial Public offer). And is also called as a primary market. Then after getting permission from SEBI the company will give advertisement to book shares at the primary market at a particular price.

Now people who want to buy particular company shares in primary market can rush to the banks and send application along with cheque to buy. Then after receiving all the applications company will allot shares to the applicants depends on the subscribing ratio. Then after allotting shares company will list it’s shares in BSE and NSE. Most probably the listing price will be greater than that of issue price in IPO. Now peoples who got shares in the primary market can sell their shares after listing in BSE and NSE if the share price increases. Later he can buy shares again in these exchanges if the value of shares reduces. This is called secondary market

We can’t even buy shares directly from BSE and NSE in secondary market. There are some registered brokers with the SEBI who are given license to take care of all the transactions done for shares. These brokers are called Share brokers or partners of SEBI. There will be sub-brokers who gets permission from main brokers or partners of SEBI who are allowed to do all the transactions wit the exchanges like BSE and NSE.

So one who wants to buy shares and sell shares should register with a Broker or Sub Broker. Then he can buy and sell any company shares through broker.

One who wants to invest in share market is called an Investor. When Investor is registered with the Broker Or Sub Broker he will be given a Demat Account and Trading Account. He can use those accounts for all his transactions.

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