When an individual enters the stock market, they have numerous questions. Among those, a prominent query is regarding demat and trading accounts, like requirements, suitability, etc. Many look for the answer to opening more than one demat account – legal issues or hurdles in the trading journey with multiple demat accounts and others. Let us help you with the basic information on multiple demat and trading accounts.
Can You Open Multiple Demat Accounts?
The short answer is yes. The capital market regulator SEBI allows individuals to open multiple demat accounts without any limitation on the number. You can link as many demat accounts to your single trading account.
Many individuals want two or more demat accounts to segregate their investment and trading profiles. Many want to segregate their investment on the basis of their financial goals and, therefore, they open multiple demat accounts. It helps them to track the growth of their capital to check if they will be able to meet their financial goals timely.
Read also: Why Is Stock Market Important For Any Country?
Does A DP Allow to Connect Demat Accounts To Trading Accounts From Other DP and stockbrokers?
Before you start setting more than one demat account, it is necessary to understand the implications of multiple demat accounts.
What you need to consider is that you cannot open more than one demat account with the same Depository Participant (DP) or stockbroker. You need to shortlist two or more best brokers to open multiple demat accounts.
You can find a few SEBI registered stock brokers that allow you to link your multiple demat accounts with the trading account opened with them. However, most DPs don’t entertain the request to link multiple demat and trading accounts.
Suppose you have a demat account with a DP registered with NSDL/CDSL, or a bank, and you create a trading account with a discount stockbroker. The broker may not permit you to link your demat account opened with the DP/bank to their trading account.
What Are the Challenges To Link Demat and Trading Accounts With Different DPs?
There are no legal issues with linking multiple demat accounts and trading accounts. Still, you may find only a few DPs that allow you to link multiple demat accounts and trading accounts.
The Primary factor that stops DPs from linking different demat accounts with other DPs is operational challenges:
- Issues Related to Cost Structure
A broker offering the same cost structure for all its clients has to face various operational challenges. Suppose you sell securities using your trading account with the broker that you hold in your demat account with another DP/broker. You have to transfer the securities to the broker’s pool account, and the trade needs to be settled within two days after the transaction day (T+2). But you are unable to transfer in time. In such a scenario, the securities will go into auction. You will need to bear the cost difference between the selling price and the auction price.
- Issues Related to Margin Trading Facility
SEBI mandates the brokers to collect margins from their clients to use a margin trading financing option. They can accept your demat securities also. Here the main problem is that it is difficult for a broker to know your demat holdings with another DP and they may not be able to offer you margin facility.
Thus, all these are crucial aspects regarding multiple brokerage accounts that one should consider. If you are looking to open demat account along with a trading account online at an affordable cost with the same stockbroker, you can consider discount broking space. Renowned discount brokers follow a digital process to complete the account opening process within a few minutes.
Read also:- Why It Is Important To Read News To Understand Trading
