Today I will teach you What is a Stock Market, so in our previous topics, I hope you have understood and received a lot of information already.
So, What were our previous topics?
It was about secondary Market, IPO, primary market
Now, it is the time for the next topic that will come after this, so, what comes after the secondary market? It is trading members, brokers, demat accounts, all of that.
So, let's begin with our today's topic,
And let's begin with Demat Account and Trading Membership.
So, What is a Demat Account, I have explained you the basic, as to if you want to invest in the IPO, so what do your require is the Demat Account which is compulsory,
If you want to buy shares, for those things also you need to have a demat account.
And the second one is Trading Membership.
So, before covering these topics,
I will explain to you,
That, If you want to open a demat account, then there are brokers, so How many brokers are there? What is the process that you will open your Demat Account?.
To open the Demat Account, what is the process that I will have to follow, will I have to go through an online process, or have to go to an authorised person,
So, both the things are applicable that you can go to any brokers, and apply online, by providing your details.
Second, is the Demat account from a particular broker you want to open, so its office should be in your area or city, so you will have to go to its office and provide the details, thereafter he will open your account.
So, if I have to go for the online process, then What will be its step that I will have to follow?
What are the things that I will have to give,
So, now we will see that.
Soz first there are many brokers, Zerodha, Angel, Sharekhan, HDFC, ICICI direct, and many other brokers are also there,
Some are full time brokers, and some are discount brokers.
So, we will cover it's difference between them now itself, but before that, we will discuss the process to open the account. We will do that process here first.
So,what are we going to do?
I will simply explain it to you here, you go on your Google, as here I will teach you one or two brokers demonstration here.
As to how to open a demat Account.
What am I going to do here?
So, here I will go on Zerodha sign up,
Here below we have got a website that is, sign up and open a Zerodha trading demat account online,
Here, What will I do?
I will give my phone number,
Why will they ask for a phone number?
So, they ask for a phone number so that it can remain in contact with you, if any problem arises in future, then how will they reach out to you, so it can happen only if they have the phone number.
So, this was about your demat account, but if you see somewhere else also, where you will buy a car, house, or open a bank account, so What will you have to do?
You will have to provide a contact number that is your phone number.
So, that they come to know your contact number, and if any issues happen in future, then they will have the access to reach out to you.
Here, What will I do, I will put my mobile number.
So, now here you will get an OTP,
Now, you know that why they give OTP,
Now, if I have to do some online payments, then what do I have to do?
UPI transaction, in that give a PIN number, still What happens is the you get an OTP, for cross verification, that if this is my account number, and I have inserted this UPI , so I am the same person?, That is the reason they ask for OTP, for double verification.
So, what am I going to do?
I will insert my OTP here…
Now, here they have asked for my pan card details, why?
Wherever you go to buy a car, a house, a bank account, everywhere you are asked for proof that if you are a citizen of India, they will ask for an Adhar card, or Pan card, electricity bill,. ration card.
Because you should know that where I can reach out the person,
So, what can I do ?
Here, I will show you by putting my pan cards, but let me tell you that my account is already open here.
So, the further process cannot be executed here.
So, What are we going to do?
Second, I will put the birth date…
Now, here, it is mentioned that pancard already exist.
Now, the further process is very simple. What are you going to do here?
Whatever details it will ask you, such as Adhar Card, bank details, bank statement, thereafter it will ask you for your signature, for which you will have to sign on a blank paper, and then you have to stand like this, and click it's photo. Why?
Because of Verification.
Next, I will try to open an account at another broker, that is Angel,
What are we going to do?
We will go on Angel broking sign up,
Here also it will do the same things, it is asking for log in, and I will put my name here,
My Mobile number..
Now, if you don't want to do this process, then you can go here, it is asking me to continue, that you can open your account in 5 minutes,
So, what are we going to do?
We will go on this link, and do the same thing,....(typing)
I will put my city,..
Now,we don't know the referral, so what can we do then?
I will tell you about one broker, so What you can do is, you can put YYDB, so your demat account will open through us only, under our observation.
Now, what will I do?
Here I will put my OTP, that I got from Angel….
Same things, it's asking me for my date of birth, my pan card, my email id, bank account, IFSC code, that I have an account open with angel so, it will not allow me to proceed.
I will tell you,
That with your pan card number all your details get automatically fetched up, email address……(typing)
Bank account number…..
Your code ….
If I click on proceed, it will show me that I already exist, so it will not let me enter.
So, with this same process, you can go in angel and open your angel account also.
So, let's start now by understanding What is a demat account, what type of brokers are there?
So, let's see.
Now, what kind of broker should we select?
There are two types of brokers,
One is Full time service Broker,
The other is Discount Broker,
What is the difference between the two, as they do the same job, but here full time service will give you some extra services apart from the broking services.
Extra services of what types; they give you suggestions.
Buy this XYZ service, here you will get good gains,
Second is, they will call you from time to time and will be in your contact, now understand what other services they will provide, if suppose they opened everyone's demat account, but I don't know How to Trade?How to buy Shares?Then, What can you do here?.
You can call your broker, what will they do?
You tell them buy 1000 shares of Reliance for me, buy TCS share for me, so it will buy the shares on your behalf, so for doing all this, it will not work for free for us.
So, it will try to charge more brokerage, for the extra services that it provides,
Other will be Discount Broker, has to do the same job, but those additional services of calling and asking to trade, be in the services, it will not do all of that,
It will just give you user id, and password set options,
And, rest will leave on to you, that you trade according to your convenience, and don't ask us for it,
But, reduce the brokerage, How? Flat 20, flat 30, or XYZ, meaning if I did one trading in a day, how much brokerage will it charge?
Only 20 rupees, whether I buy 1000 shares, 2000 shares, or even ten thousand shares, How much brokerage will it incur?
Only 20 rupees, but not like this, it will put on per order,
So, if I place a 1000 shares order, so as per 20 rupees one order each, it will incur accordingly.
So, this is the basic difference between full time brokers and discount brokers.
Second thing is, choose such a broker who does not levy certain hidden charges,
As before they will tell us, that this much only is our hidden charges but inside there are some hidden charges that are always there.
Third, the thing that you will bother about is, whether you go online to open the account or go to some broker for it, the application that they provide should be friendly to use, that will be fast and easy to understand, and should not create complexities to understand.
Next, assume that I don't know how to do trading, then if I am asking any broker to do it for me, then it should be safe, it should not be the case that he is doing the actions for its benefits, such as buying and selling in small quantities and doing profit and loss again and again.
In this way, you won't get anything big here. What will happen is,?. His business is running there.
And creating earning for himself.
So, our broker shouldn't be of that type.
Now, to open a Demat Account, What are the things that you should have?
Pan Card, and
These are such things that should always be linked with your Adhar card.
Wherever you are opening the demat account, read the terms and conditions beforehand only.
Read the papers of Power of Attorney,
You should know that, What are the charges that the broker will levy upon us?
What are the things?
So, this is some of the basic things about the Demat Account as to How to open the Demat Account? What is a demat account? What are the types of Demat accounts?.
So, we will begin with our next topic.
And we will begin to see What is Trading Membership,
So, Who are they?
They are Trading Member, while studying Exchanges, I had told you when you want to trade you can not go directly because you have the have an intermediary, for us intermediary is our broker, meaning trading member,
Trading member is such a person who has established a membership with the Exchange.
Which is, "I come here, on behalf of my clients to buy and sell over here". That is I will bring my clients, with a unique ID and a different pan, from where they will come and buy their shares, and also sell their shares.
These are established based on the rules and regulations formulated by the SCRA Acts, SEBI Act and other big things, about which we will cover in our upcoming topics, that is legal framework, SCRA Acts, we will study inside it.
So, the basic meaning of What is a Stock Broker is that whenever I want to buy a share, I want an intermediary person who will on my behalf go and trade, ok!
Now, What are the benefits that are there in Trading Membership,
First thing, there are no entry or exit barriers to become a trading member, anyone can become, and any person can also exit its trading membership,
Before exiting, he will have to surrender the trading member card issue to him.
Second thing is, "access to nationwide trading facilities", meaning it's not like I will have to phone a person, to ask for the prices, buy shares for me, he doesn't have to do all of that, as he can use his application and directly search from it, and find out the prices, prices for Tata consultancy, prices for Wipro, etc.
So it is a nationwide facility, so it's not like I can sit here at my city, Ahmedabad and do it from here only, I can go to Karnataka, to Goa, to Jammu and still do trading from there.
Next is trading members give us transparency, as compared to earlier times where you have to call the broker and ask him to buy shares, Now, since we have shifted to demat account everybody knows to use the application, so you can cross check the prices that means there is a transparency and there is no hidden charges that the broker can levy upon, unlike earlier the brokers used to tell the prices are 2200 but the actual price used to be 2190, so with this transparency has increased.
Second thing is as I have told you previously that in earlier times we used to be given paper shares, if I explain you this in a simple way then earlier we had to see the bank statement to know the balance, for which you had to visit the bank with your passbook and give it to your cashier and ask him to print it so that you can view your balance, then he used to print the passbook and give to us by which we use to get to know our balance.
So as we proceeded with the internet facility, and shifted over there, then by just clicking on our user id and password I could get access to the details of my balance whether it's of SBI or its of Axis.
Similarly it was with the Demat account that earlier the broker used to give as a physical copy of the share, so it was like an agreement paper which had the detail that you have bought these many shares, but what was the flaws with that paper shares, first suppose that it used to come through a post, that's made it quite time consuming, after receiving I kept it somewhere at my home, but it got misplaced or lost, it may be possible that children must have misplaced while playing games, or the rats nibbles and tears the copy of the physical share, or a water gets spilled on it, so this was some of the disadvantages of having the paper shares.
So the SEBI changed this concept then nobody would be provided with the hard copy, and everyone will have the shares under one electronic system, so it will come under one electronic way only.
That is if I have to buy the shares this is the way or if I have to sell the shares then also this is a way.
I don't need to ring a phone and all of these stuffs, it's done under electronic way only,
As you do any online transaction, that give your UPI ID or your number and the transaction is done, I can send you money like this.
Same things happens in shares also,
Next, is "demutualized exchange which is managed by independent and experienced professionals", meaning earlier What use to happen is that, whenever any problem arises, then a broker used to solve the problem among themselves sitting at their offices.
So, this has changed after the Harsad Mehta scam, after which the SEBI was powerfully enacted.
So, no brokers can automatically work on their own, he will have to give all the information to the SEBI, and raise the issue to the SEBI and cannot settle on its own. So, SEBI will do everything you will not be able to do anything.
Next benefit of having membership is that you are dealing with such an organisation who follows strict standards for trading and settlements.
So, these were some of the benefits of becoming a trading member.
Now, who are eligible to become a trading member,
First,he should be an Indian Citizen.
Partnership that means two people together can also do,
Then, any big institutions or company who wants to do his broking services,
Or, any bank who wants to bring out his broking services,
So, anybody can do that.
Even though you fulfilled this criteria, but thats just not enough, as you are bringing clients to do trading, you have to provide the limit, so all in all you should have a good amount of capital,
It is important, Why?
Suppose I want to enable a client to do trading then, I will provide him with the limits, suppose he has 10 thousand rupees, then I will provide him with the limit of 1 lakh, meaning I will lend him 90 thousand rupees, so if there is loss it is for me as well as for him, so even I can have the problems.
So, that is the reason these paid up capitals, that I had to submit to NSE beforehand only, your clients trades later, but you will be ask to submit the capital before.
Thereafter what will you have to do, is you will have to provide interest free security deposit,
Meaning of interest free is, that the deposit you will provide on that you won't get any interest.
Next, you will have to do a Collateral Security Deposit, meaning suppose if I want to buy a house, and for that if I don't have cash, then I will have to take out a loan, I want a loan of 10 crores, Ok!
My property worth is 5 to 7 crores, so bank proposed that it can give only 5 crores and not 10 crores, but I had the need of 10 crore, so the rest will be collateral, meaning such a deposit which will be above my property's worth, that it will be additional, for instance if tomorrow my client puts me in default, so it will set from this only.
Next is ,my track record should be good, why? So that it can be known that you haven't done any fraud earlier, and there are no cases of fraudulent activities imposed on me,
Your education, then experience, Why is your experience important?Because you are entering a professional field and going to a good place, you will have the need to handle big clients, so because of that it's important to have experience.
Then only, you can provide quality broking services to your clients,
So, these are some of the eligibility criteria.
If you have any doubts or queries,then you can post that in the comment section, and in this way your questions will reach us, and your comment will reach the other learners, the result of which, it will help in creating discussion of queries and solutions.
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