Trading Account Opening Process

How to Open a Trading Account

India has been moving towards a cashless economy. It is faster, secure and more cost-efficient. The origin of the digital revolution of finance lies in the capital markets. The stock markets shifted to electronic mode of trading (dematerialisation) in 1996 ever since the introduction of the Depositories Act 1996.

Before the conversion, the stock markets operated on an open outcry system. Traders communicated verbally and through gestures to buy and sell shares. With the advent of electronic trading, a simple online command is enough to execute a trade. However, electronic trading has prerequisites like having a demat account, trading account and bank account to access the capital markets.

What is a Trading Account?

A trading account is required to hold or buy new securities. Similar to a bank account, a Demat account is used to store the different kinds of securities bought by the investor. It is essentially an interface between the Demat account and the investor. It is not possible to buy or sell a unit of security without a trading account.

You just have to place the order through the trading account and the request to buy/sell is forwarded to the stock exchanges. Once completed, the securities are either deposited or withdrawn from the demat account as per the order request and the required amount is deducted from the bank account in the case of buy transactions or deposited in the case of sell transactions.

Features of Trading Account

A trading account is not limited to stocks, there are trading accounts for currencies, commodities, bonds, gold and exchange-traded funds. The biggest benefit is that you can open trading accounts online or visiting the office of the broker.

Through a single trading account, you can access stock exchanges like BSE and NSE, commodity exchanges like Multi-Commodity Exchange and National Commodity and Derivatives Exchange. Opening trading accounts online gives you flexibility to trade through multiple mediums and trade through mobile, desktop or through a call.

Step-by-Step Guide on How to Open a Trading Account :

Opening a trading account online opens up a host of investing possibilities. You can open a trading account in a few simple steps:

  • In the first step, choose a brokerage firm to open a trading account after conducting a thorough research. Take the various charges levied by brokerages, the interface of the trading platform and the value-added services into account before finalising a brokerage firm.
  • After selecting a broker, enquire about the trading account opening procedure. The brokerage will require you to fill up an account opening form and a Know Your Customer (KYC) form. A representative from the brokerage firm will assist you with the process. Brokerages offer a only Trading account or Demat-cum-trading account as a Demat account is mandatory to store the securities.
  • You will also have to submit identity proof, residence proof and in some cases proof of income. A photocopy of the Aadhar card or passport, besides several other documents, can be used as proof of residence and a copy of an Aadhar card or PAN card can be used as identity proof. The PAN card is compulsory to open a trading account. You will also have to submit bank details, cancelled cheque, bank statement etc. If you are opting to open only trading account than CML report of your demat account is also required.
  • Post submission of the documents, the brokerage will conduct a manual KYC verification. A representative may visit your house to verify the documents or an online verification will be conducted. If you do not want to manually verify the documents, you can opt for the e-KYC process. For the e-KYC process, your PAN card should be linked to the Aadhar card and your bank account. The mobile number submitted in the account opening form should be the same as the Aadhar card for the e-KYC process.
  • It generally takes 1-3 days to activate the trading account after the completion of the verification process.
 
     
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