The most important thing between these two is that you buy/sell shares in the secondary market through the trading account and its effect i.e. debit or credit of securities is reflected in the demat account. Let us finally know how these two are different from each other.

Trading account is a flow while Demat account is a stock

Transactions happen in the trading account but the securities appear as debit or credit in the demat account. The trading account is a record of the transactions of buying and selling of shares and it is the trading account where you execute your trades on the stock exchange. The demat account cannot execute transactions in the open market. This is why, even though you do not need a trading account to apply for an IPO, you still need a trading account to sell the shares allotted to you in an IPO.

The main difference between the two is ownership.

A demat account comes in handy when it involves ownership of assets. The main difference between a trading account and a demat account is ownership. Only assets or securities that you own can come into a demat account. This is why intraday trades and F&O trades happen in a trading account but do not appear in a demat account. Intraday trades or futures and options transactions do not create ownership. They only create transactions that allow you to participate in the price rise or fall. Then there are others like bonds, RBI bonds and mutual funds, where you can buy and sell from a demat account without using a trading account.

Demat account is required for IPO, not trading account

You can apply for IPOs with a demat account without a trading account. You need a demat account when you apply for an IPO because the shares will be allotted only through demat credit as physical share allotment is no longer allowed. According to SBI Securities, however, you do not need a trading account to invest in an IPO, but that is only a part of it. After getting an allotment in an IPO, if the share is listed at a premium of 70% and you want to sell the shares, you need a trading account.

You can get an allotment in an IPO and hold them in your demat account. However, to sell these shares, you still need a trading account. This is why a trading account cum demat account makes a lot of sense for investors. Direct selling from a demat account is not allowed, so the day you choose to sell IPO shares, you need a trading account.

Is a demat account necessary for F&O intraday trading?

There are occasions when you do not need a trading account. If you only want to hold RBI bonds in your demat account, then a trading account is not required. In this case, just having a demat account is enough. Similarly, if you have received shares as a gift or inherited and you do not want to sell them, then a demat account is enough, a trading account is not required.

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So that, in case of any kind of emergency, your investment can go to the right person. SEBI has set a deadline for demat account holders to file a nominee by June 30, 2024. You must complete the work of making a nominee by June 30.

Is it necessary to make a nominee?

The reason behind this move by SEBI is to help investors secure their assets and pass them on to their legal heirs. Market regulator SEBI has also stated that the order to file a nominee applies to both new and existing investors. Under SEBI’s rule, new investors will have to either appoint a nominee for their securities while opening trading and demat accounts or formally opt out of the nomination through a declaration form. That is, you will state through this declaration form that you do not want to appoint anyone as a nominee.

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SEBI has extended the deadline several times

Sebi had initially set a deadline of March 31, 2023 for account holders to nominate beneficiaries or formally exit. The regulator had indicated that failing to do so would result in the account being deactivated. The deadline was later extended twice, the last time to December 31, 2023. Despite the warnings and extension of deadlines, investors are still not filing nominees.

The post Demat, mutual fund nomination deadline – check last date first appeared on Rightsofemployees.com.