A stockbroker is a corporate entity registered as a trading member with the stock exchange and holds a stockbroking license. SEBI grants the license through due diligence, and the broker is expected to comply with the rules prescribed by SEBI. (View Highlight)
A stockbroker is your gateway to the stock markets to make investments in stocks, bonds, ETFs, and Mutual funds. To transact in the stock market, you must set up (open account) with a stockbroker of your choice (View Highlight)
The essential services provided by the broker include…
Access to the markets and allow you to transact
Margins for trading, we will discuss this point at a later point
Support in terms of call and trade, help you resolve queries, educate you on markets
Issue contract notes for the transactions – A contract note is a written confirmation detailing the transactions you have carried out during the day.
Facilitate the fund transfer between your trading and bank account
Provide you with a back-office. The back office is a portal to access many reports about your account. Zerodha’s back office is called Console.
The broker charges a fee for the services provided, also called the ‘brokerage charge’ or just brokerage. The brokerage rates vary, and it’s up to you to find a broker you think strikes a balance between the brokerage charged and the services provided. (View Highlight)
A share certificate is nothing but a document entitling you as the owner of the shares in a company. Before 1996 the share certificate was in paper format; however, post-1996, the share certificates were converted to digital form. Converting a paper format share certificate into a digital format share certificate is called “Dematerialization,” often abbreviated as DEMAT. (View Highlight)
The storage place for the digital share certificate is the ‘DEMAT Account. A Depository is a financial intermediary that offers the Demat account service. Think of the demat account as a digital vault for your shares. As you may have guessed, your broker’s trading account and the DEMAT account from the Depository are interlinked. (View Highlight)
At present, only two depositaries offer DEMAT account services. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited. There is virtually no difference between the two, and both operate under strict SEBI regulations. (View Highlight)
To open a demat account, you must speak to a Depository Participant (DP). A DP helps you set up your DEMAT account with a Depository. A DP acts as an intermediary between you and the Depository. (View Highlight)
Both the trading account and bank account are linked (View Highlight)
NSE Clearing Limited and Indian Clearing Corporation (ICCL) are wholly owned subsidiaries of the National Stock Exchange and Bombay Stock Exchange, respectively. (View Highlight)
the clearing corporation’s role is to ensure the following:
• • Identify the buyer and seller and match the debit and credit process
• Ensure no defaults – The clearing corporation also ensures no defaults by either party. For instance, after selling the shares, the seller should not be able to back out, thereby defaulting in his transaction. (View Highlight)
