When acquiring a property, it is important to ensure that the documentation confirming its ownership is safeguarded in order to support any claims of possession.
When you purchase a share, the only way to show ownership is by presenting your share certificate. This document acts as proof that you have the shares of a company. Prior to 1996, these certificates were in a physical format, but after that, they were converted into digital form. This process is known as dematerialization, or DEMAT for short.
The 1992 Harshad Mehta scam played a pivotal role in digitizing share certificates. Yes, you heard that right. Many movies and web series have been made on this incident which one can watch to understand what had happened then.
The DEMAT format share certificate needs to be stored digitally. This is done through a ‘DEMAT Account’. A Depository provides this service, which acts like a digital vault for your shares. It’s worth noting that your broker’s trading account and the Demat account from the Depository are linked.
If you’re looking to purchase shares of Reliance Indusrtries Ltd. shares, all that is required of you is to open a trading account and search for their pricing. Once the transaction is completed, your trading account’s job has been done; Reliance Industries shares will be instantly credited to your demat account.
When you want to sell the same shares, simply login to your trading account and submit the sell order. Your broker will credit the money to your account, having simultaneously debited the stock from your demat account.
Currently, two depositories offer DEMAT account services, namely National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited. Both of them function within the framework of stringent SEBI regulations, with minimal differences between them.
You cannot just walk into the National Stock Exchange (NSE) or a Depository such as NSDL or CDSL to open a trading or DEMAT account for yourself. Instead, you must talk to a Depository Participant (DP) who will help you set up your account with the appropriate Depository. Your DP will also be held to regulations by SEBI.
Stoxbox is registered as a depository participant with Central Depository Services (India) Limited (CDSL).