Brokerage Account

Posted in Finance, Accounting and Economics Terms, Total Reads: 298
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Definition: Brokerage Account

An account with a licensed brokerage firm which allows you to invest. Investor maintains the accounts with funds using which he places an order which is executed by the brokerage firm on behalf of the investor.

 

Explanation:

When you want to invest in capital market the very first step that you need to do is to open a dmat account and once you open a dmat account you contact a brokerage firm to which you give the right to access or debit credit your dmat account. The brokerage firm will connect tour dmat account with their brokerage account. Now, whenever you want to buy any stock you will ask you brokerage firm. The firm will buy the stock themselves and then will transfer it to your account. You must have some money in your account in order to execute the deal. Brokerage firms charge you for each transaction that you make. The charges depend on the type of account you have and the firm in which the account in as you may have an account which provides you with some advanced facilities in that case you may have to pay higher.


You may ask why you need a brokerage account when you already have a DMAT account.


The answer to that is that in order to buy or sell a stock from market directly you need to maintain account with the regulatory authority which a normal person cannot afford as the requirements are too high. So, the brokerage firms maintains an account with the regulator and you with the brokerage firm.

 

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