[ecis2016.org] A trading account denotes an online or virtual account which allows people to manage their shares in the stock market.
Trading accounts have revolutionised the way people operate in the stock market. This new way of maintaining shares has proved to be more convenient and speedy as compared to the old systems of open outcry. With the help of trading accounts, physical interaction and presence is not required, saving time for both parties.
You are reading: Trading accounts: System of operation and advantages of having
Trading account: Meaning
A trading account denotes an online or virtual account which allows people to manage their shares in the stock market. The system has been introduced to cut down on transaction times, and eliminate physical presence for buyers and sellers.
In the old system of operation, the open outcry system was followed where buyers and sellers did business through verbal communication and hand signals. This system proved to be lengthy and required people to do a lot of travelling. The online system allows people to conduct business at home through their trading accounts and a broker.
Trading account: Benefits
Trading accounts are the new way to conduct complicated share market dealings in a simple and effective way. Here are some great advantages of using a trading account:-
Easy access across multiple stock exchange platform
There are a variety of stock exchange platforms available in India. Each of these platforms conduct trade dealings in varying securities and commodities. Some of the most popular stock exchange platforms are:
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
- National Commodity and Derivatives Exchange (NCDEX)
- Multi Commodity Exchange (MCX)
A person might want to have dealings with all these platforms but it is difficult to maintain connections and transactions on all platforms without an intermediary space. A trading account will help them gain access to all types of exchanges and conduct dealings under one platform. Going physically to conduct business across multiple stock exchanges will not be required.
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Access to reliable information
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Online trading accounts offer much more than buying and selling of shares. It is a smart platform which also conducts research to present important information on stock trading and the likes. This information allows people to invest consciously and cleverly. The reports provided by trading platforms come from professionals who know the stock market better than anyone else. If you are unsure of making investments, their reports will guide you and save you from making mistakes or bad investments.
Notifications and customisation
The trading accounts are assigned to professionals and experts who will be in charge of assisting people in their investments and dealings. They will be available 24*7 to solve any customer issue or support if requested by the account holder. Trading accounts also provide SMS or emails notification services to keep people in the loop about the latest reports and their personal investments.
Flexibility and convenience
Virtual trading accounts literally mean you can access information on your investments virtually. People with a trading account will receive all information related to stock exchange from the comfort of their homes. Trading apps can be installed across multiple devices, making it convenient for people who travel for work.
Seamless transactions
Since trading accounts are connected with your bank accounts, the online trading fund transfers are done seamlessly. The fast transactions make it easier to buy and sell shares as fast as possible, omitting the need to go to or inform banks separately for conducting transactions.
Trading account: Documents required
Since financial risks are involved, trading accounts require the detailed information of account holders like their identity, salary, etc. Most authentic trading accounts require people to produce these documents online for verification. Here is a list of mandatory documents which will be required for the creation of trading accounts:-
Proof of income
Account holders must submit their salary information and income proof since the platform deals with financial investments. Some common documents to provide proof of income are listed below:-
- Income Tax Return (ITR) Acknowledgement slip. You can receive this slip when you file a tax return.
- Certificate of net worth. As an alternative, you can also provide a copy of your yearly statement of accounts which should be checked by a Chartered Accountant.
- The recent salary slip of salaried employees needs to be submitted. You can also submit Form 16 as a salary proof.
- Latest bank account statements reflect the credit history of the last 6 months of non-salaried employees.
- Certificates to prove ownership of assets through self-declaration.
Proof of identity
To conduct business and financial dealings on the account holder’s behalf, the trading account should ensure the identity information of the account holder is authentic. The various documents which can help in proving one’s identity are:
- PAN card containing the account holder’s photograph.
- Aadhaar card / Voter ID card / driving licence/ Passport of account holder.
- Identity card with account holder’s photo which is issued by their employer be it in the government or private sector.
Proof of address
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Proof of address for a trading account is necessary. An account holder can provide the following documents as their address proof:-
- Passport/Ration Card/Registered Lease or Sale Agreement of Residence/Voters Identity Card/Driving Licence/Flat Maintenance bill/insurance copy.
- Telephone bill/electricity/gas bill which dates less than 3 months.
- Recent Bank Passbook updated within 3 months.
- Declaration of new address attested by High court and Supreme court judges.
- Address proof issued by NBFC managers, government banks, MPs or MLAs.
- Identity card containing address which is issued by an employer in the government or private sector.
- Address proof containing the name of the account holder’s spouse.
Trading account: How does it work?
A trading account acts as a transitional account between the stock market and the account holder’s bank account. A person interested in stock market dealings will have a demat account for his shares, a trading account for conducting business or placing requests, and a bank account for monetary transactions.
When a person wants to buy or sell a share, they can request that on their trading account. In the case of selling shares, the request will be communicated to the broker. After approval, the shares will be sold and the money will be deposited in their bank account.
In case someone wants to buy a share, they can request it on their trading account. The request will be processed and after approval, the money required for the purchase will be deducted from the account holder’s bank. People who want to sell equity shares can follow these processes to meet their requirements. There is no need for the account holder to be present for the business dealings.
Trading Account: How to open?
A trading account can be opened online through apps and websites. A trading account can be opened by interested people who must select a stock broker.
- Select a Stock Broker who will conduct the dealings on your behalf. Make sure you think carefully before selecting the person of your choice.
- Select a brokerage firm which specialises in creating and maintaining trading accounts.
- An employee of the trading firm will come to your house with a form which you must fill up to open an account. A Know Your Client (KYC) form will also be provided to all clients. They will also ask for the verification document mentioned above.
- The forms and documents will be taken for submission. The firm will then verify your details virtually or physically depending on the situation.
- After your application is processed, your trading account will be active and contain all the information that you will require.
Directives to find a suitable broker
People who want to open a trading account must follow these directives to do so:-
- Always go for a reputed broker, who is well-known among other investors. Reputed brokers will carry the assurance that you won’t be kept hanging for unnecessary amounts of time. They would also be better at securing good deals due to their vast experience.
- Don’t be fooled into paying too much money towards a stock broker. Always compare the present market rates to see if their experience and reputation is deserving of a good fee. If you have a tight budget, a comparison of brokers and their rates will help you get the best deal possible without your budget.
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