The primary reason for increasing retail participation in the stock market. This is the ease of handling financial securities. With the continuous monitoring of each trade at stock exchanges and favorable reforms by the SEBI, investors can more confidently participate in the stock market. Demat accounts and trading accounts provide easy access to the stock market. Stock exchanges operate online to facilitate online trading based on trading accounts and demat accounts.
Let us pour light on the online trading procedure on the stock exchanges and how to start trading in India.
How Stock Exchange Facilitates Online Trading
Stock exchanges are online destinations where buyers and sellers meet interested in financial securities in the stock market. Stock exchanges do not deal with investors directly. Investors and traders can access the stock exchanges through SEBI registered stockbrokers. Stockbrokers are the authorized medium and intermediaries that connect you with the stock market. They offer Demat services and e-trading services. They are the members of formal stock exchanges to provide the facility of the online trading system through Demat and trading accounts.
To start stock trading, you need a Demat account and trading account.
- A Demat account is necessary to hold all your financial securities. It works as a repository via a stockbroker with SEBI and central depositories. It can store a number of securities, including stocks, debentures, bonds, Government securities, currencies, and mutual funds.
- A trading account is required to place buy/sell orders for securities in the stock market. It facilitates you with an online trading platform that is connected to the stock exchange. This trading platform is required to make online orders to buy/sell securities. You can place trades without visiting a stockbroker or stock exchange.
Trading Procedure On A Stock Exchange
- Whenever an individual places a buy/sell request for security using their trading account on the stock exchange, the stockbrokers forward these trades to the relevant stock exchange, and the exchange executes the order.
- Then the stock exchange matches your trade order with another market participant. It finds a buyer/seller placed a buy/sell trade for the same security in the same number.
- Once found, it sends this order to clearing corporations. Stock markets have their clearing corporations for trading transactions. The house will debit the particular securities from the seller’s Demat account and credit them to the investor’s Demat account. They ensure fast and smooth credit, debit, and delivery of financial assets in the investor’s Demat account online.
Your trade gets completed this way in the stock market. All purchases you make are called Demat credits, and sell transactions are called Demat debits.
How to Start Trading in India
As mentioned, you need a Demat and trading account to start stock trading as it connects you to the different stock exchanges. A Demat account is imperative to enter the stock market. It is convenient to open a Demat account online. Look at ‘how to open demat account online‘ along with a trading account:
- Select a registered stockbroker, preferably a discount broker, to save on cost. Explore the broker’s official website and access the Demat account online form.
- Input basic personal details – your name, PAN, and contact number. You must enter an active mobile number to receive an OTP. Verify the received OTP to continue the procedure.
- Now enter other required information like bank account details, resident address, job profile or work details, etc.,
- Upload scanned copies of the required documents – ID proof, residence proof, income proof.
- Make a short self-declaration video for the verification process. Put your e-sign on the application form, and submit it. The agreement consists of the rights and duties of the broker and the investor.
You should check the Demat account charges mentioned on the agreement before signing it. Once this process is complete, you can have your Demat account number and login credentials.
This is the way that makes online trading easy on stock exchanges.