MIS AssignmentABC Investments- A Finance Broker Firm

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Our Contact ShareKhan Business Partner

Mr. Pradeep KumarShare Khan LimitedB-3/11, Model Town-1, DelhiPh: 9953437292

UnderstandingDemat and Trading Account

Below is a short chart which explains the flow when we buy a share

• Demat Account : Account where your Shares are stored in electronic form .

• Trading Account : An account which is used to place orders for Buying and Selling of shares .

• Trading account is an interface between your Bank account and your Demat account , when you buy something , Trading account takes money from your Bank Account (Its already taken from your Bank account and saved in Trading account) and buys shares and stores it in your Demat account . When you Sell something , Your trading account takes back the shares from your Demat account and Sells them in Stock Market and get back the money and that goes back to your Bank account (actually you manually transfer it to Bank account from Trading account most of the times .

Demat Account Definition

• Demat refers to a dematerialised account.• Though the company is under obligation to offer the securities in

both physical and demat mode, you have the choice to receive the securities in either mode.

• If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application.

• It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen.

HOW TO OPEN A DEMAT ACCOUNT ?

• You approach a DP and fill up the Demat account-opening booklet. The Web sites of the NSDL and the CDSL list the approved DPs.

• You will then receive an account number and a DP ID number for the account. Quote both the numbers in all future correspondence with your DPs.

Is a demat account a must?• Nowadays, practically all trades have to be settled in dematerialised

form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.

• So a demat account is a must for trading and investing.• Most banks are also DP participants, as are many brokers. • You can choose your very own DP. • A broker is separate from a DP. A broker is a member of the stock exchange,

who buys and sells shares on his behalf and on behalf of his clients. • A DP will just give you an account to hold those shares. • You do not have to take the same DP that your broker takes. You can choose

your own. • Banks are also advantageous because of the number of branches they have.

Some banks give the option of opening a Demat account in any branch, while others restrict themselves to a selected set of branches.

• Some private banks also provide online access to the Demat account. So, you can check on your holdings, transactions and status of requests through the net banking facility. A broker who acts as a DP may not be able to provide these services

DEMAT ACCOUNT OPENING COST AND OTHER CHARGES

• Annual maintenance fee: This is also known as folio maintenance charges, and is generally levied in advance.

• Custodian fee: This fee is charged monthly and depends on the number of securities (international securities identification numbers – ISIN) held in the account. It generally ranges between Rs. 0.5 to Rs. 1 per ISIN per month.

• DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository.

• Transaction fee: The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to he transaction value, subject to a minimum amount.

• The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected.

• In addition, service tax is also charged by the DPs.

Online and Net Based trading

Who benefits the most ?

• Internet-based stock trading, while still in its infancy in the country, has the potential to really benefit the investor, with its ability to offer greater speed and transparency, at a much lower cost.

• The essential component of Internet-based trading is the interface between broker, bank and depository participant, and as Net-based trading becomes a reality this interface will develop.

Offline Trading

• Traditionally, investors have been doing stock transactions with their broker either by placing orders on the phone or by visiting the brokers’ offices. During times of heightened market activity, investors find it difficult to get the broker on telephone or fax. Even if the client goes to the broker’s office, the attention he gets on a busy day is based on the size of his order, often resulting in frustration, arguments and disputes.

Online Trading• The client, after signing an agreement with the Net broker, gets a

password which enables him to get the trading terminal on his computer. This terminal gives real-time information on the offers and bids, as also various market information such as the Nifty index, volume last traded, rate, quantity and so on. The client can also set up his own market watch of shares in which he has an interest. The trader can set up a portfolio watch so that the value of his portfolio can be updated on a realtime basis. When the client feeds in the order, the order goes to the broker’s trading server and from there to the NSE system. Once the trade is executed, the confirmation along with the order number and trade number and time of execution flows back to the client.

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