Demat and physical form of securities

A good understanding on dematerialized and paper form of security certificates is a must for investors. Lots of investors who had purchased shares years back still holding the share certificates in the paper format. After the compulsory dematerialized format standard implemented by stock exchanges around the world, some of these investors, still holding paper form of shares, have doubt on how to sell there shares in the stock market. This is an article educating you the difference between dematerialized and physical form of securities and how to deal with each.

DMAT or dematerialized form – This is the electronic form of shares. Presently, an investor required to open a trading account with an approved stock broker to purchase or sell shares. Once after purchasing the shares, his broker will receive the shares for him in the electronic form and that will remit to the stock brokers central depositary account. Investors will receive these ISIN (International Securities Identification Number) numbers from his broker to identify his stocks or securities which is holding by his stock broker in there account for him. You are only receiving an account statement from your stock broker mentioning the ISIN numbers of all stocks that he is holding in his depositary account on behalf of you.

The major advantage of electronic form is, it is very fast compare with physical form. You will receive the shares in your account within time and no need to hold any papers or certificates related to that deal. Also, there will not be any confusion on the shares get damaged due to common mistakes or errors.

Please visit here for more detail information on an ISIN number

Physical form - It is just the paper form. Years back when you were purchasing shares, your shares printing on a paper and that certificate will mail to you directly. This was your only proof as a share holder in any company. Whenever required to sell such shares, you were contacting the stock broker with these certificates and he will do the transactions on behalf of you.

The advantage is, physical form of shares does not required any trading account to store or account with any broker to purchase. You can go directly to a stock broker and place the purchase or sell orders. Certificates will come to you directly by mail if purchase.

The disadvantage of this form is, the time the transactions taking. Lengthy time as well as the possibility of damage chance is high.

There are some notes below for your knowledge

- Presently, all the shares that trading in the stock exchanges have compulsory dmat form.

- If you have a physical stock certificate, first you have to convert the same to dematerialized form to sell. To do this, you are required to open an online or offline account with a reputed, approved stock broker or sub-broker.

- You can still convert a dmat share to a physical form and vice versa. Whaterver it is, to sell a stock in the market, it should be in the demat form.

- dmat shares can be transferred between any account using the cheque leaf available from your stock broker with whom you are having your trading account. It is just like transferring money from one bank account to another bank account using the cheque.

Hope the above added knowledge to you. If you feel that I have missed anything, please inform me. I will add the same as soon as possible. Best wishes.