I am a first-time investor. Hence I have some queries on demat and trading accounts.
I understand that a single demat account can be linked with more than one trading accounts opened with different intermediaries. Hence a person can trade with different intermediaries even with a single demat account. I have 3 questions in this aspect.
Is it allowed to trade with different intermediaries even with a single trading account? Or, is it compulsory to open a new trading account with each new intermediary.
If a person is trading with a single demat account with different intermediaries, then all the different intermediaries have the Power of Attorney over the same demat account. Is it right?
A demat account is located at either of the two depositories (NSDL/CDSL). Likewise, where are the trading accounts located?
Theoretically, yes one demat can be mapped to multiple trading accounts. Buying shares has no issues. So if you have mapped one demat to multiple trading, whichever trading account you buy from, the stock will get delivered to this demat.
The practical issue is that one demat can’t have multiple POA’s on it. So what it means is that, you will be able to sell these shares bought only through one trading account - to whom you have given the POA.
Trading accounts are with the exchanges - NSE/BSE. Accounts through which you trade/buy or sell.
TRUST essentially replaces the need of DIS slips. People trading offline used to give blank DIS slips to deliver stocks to exchanges when it is sold. This is a risk and hence the TRUST services help out in this.
But TRUST doesn’t help in terms of online trading. The risk online brokers take when allowing clients to sell is, what if you sell the stock and back out from delivering the shares? The entire risk is on the head of the broker. Hence all online brokers allow selling of shares only if limited power POA is given on the demat.
Let me give an example, assume there was 100 shares of stock x trading at Rs 100 in a clients demat. Clients sells it in the morning at Rs 100 on the exchange. Some news on the stock and suddenly it shoots upto Rs 200. Since the trade is executed, broker has to delivery these shares to exchange tomorrow. What if the client backs out of it (if using TRUST). The broker will have to then bear the loss of Rs 100 x 100 (and all auction penalty).
Demat accounts with limited POA, the client will have no way to back out. Hence we cannot offer without POA.
But still, some doubts. Is it possible to trade with different intermediaries with a single trading account or we need new trading account for each new intermediary. Is each trading account specific to a single intermediary?
For zerodha, trading accounts are opened at NSE/ BSE or both?