InvestorQ : How do the trading account and the demat account actually interface with one another and how does the relationship between them work?
sara Kunju made post

How do the trading account and the demat account actually interface with one another and how does the relationship between them work?

Answer
user profile image
1 year ago


Trading account is the engine for transacting in equities in the stock market. Is demat account necessary for trading and can you actually be trading without demat account? The process flow works something like this. Before you buy shares you first need to fund your trading account. This can either be done by NEFT/RTGS or IMPS from your registered bank account. Nowadays, trading accounts are also offering the facility of funding your trading account using UPI facility which is quicker and seamless. Typically, brokers will insist that your account be pre-funded in case of delivery to the extent of the full delivery value. On the date of trade, the broker will confirm the trade through the contract note but the pay-in has to happen on T+1 day in the first half. If it has not happened then the broker will be forced to sell your shares and manage the pay-in. If you are pay-ins are clear then on T+2 day, the shares will automatically be credited into your demat account. This is the most basic type of process flow that links up the trading account and the demat account of the trader.

What happens when you sell the shares? What is the process flow in that case? The reverse order works in case you sell the shares. When you sell the shares the broker will first seek confirmation that you have the requisite balance in your demat account. Once the sell transaction is executed in your trading account, then on the next day the shares will get debited to your demat account. On the T+2 day, the credit for the sale of shares will automatically be credited to your bank account. In case, you have partially used up your credit in the trading account for initiating fresh trades in the stock market, then only the balance amount will be credited to your bank account.