De­mat Ac­count

15 de­pos­i­tory par­tic­i­pants com­pared

Consumer Voice - - Contents - Subas Ti­wari & Gopal Ravi Ku­mar

Chances are you have not seen a ‘share cer­tifi­cate’. Why? Be­cause most in­vestors to­day have their hold­ings in ‘de­mat’ or elec­tronic form. Now, to many the term ‘de­mat’ may seem to be a dis­tant some­thing – dab­bled in by stock-ex­change pa­trons. Far from it, though. This re­port will tell you the why, the what, and the how of the de­mat sys­tem, in the process ex­plain­ing what it means to in­vest in the stock mar­ket.

De­mat is a sim­ple ab­bre­vi­a­tion for de­ma­te­ri­al­ized – this im­plies ‘in elec­tronic for­mat’ as against ‘in phys­i­cal for­mat’—or ma­te­ri­al­ized. What ex­actly does it mean?

To be­gin with, this is another of the tech­nol­ogy-spawned mar­vels that cuts through the clut­ter and helps stream­line pro­cesses and sys­tems. Be­fore de­ma­te­ri­al­iza­tion, the stock ex­changes were a ca­coph­ony of sounds, with traders stand­ing on the floor and shout­ing out prices of stocks for buy­ing or selling. Then, money would be ex­changed for phys­i­cal re­ceipts of the shares, in the form of cer­tifi­cates. This led to a great deal of pa­per­work. Even the set­tle­ments of trade agree­ments took time be­cause of the need to de­liver the share cer­tifi­cates.

With the open­ing of a large num­ber of stock ex­changes, and a large num­ber of com­pa­nies list­ing their shares at these ex­changes, there was much de­mand for buy­ing up stock, thereby caus­ing an

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