“DP charges” is one of the most commonly used terms in the stock market. But, what are DP charges, and can you avoid them? You must know what this term means particularly in case you are about to open a demat account.
What are DP charges?
In the stock market, a depository participant (DP) is an interlink between an investor and a depository like the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).
A DP can be in the form of a broker or a bank. In order to buy securities in the financial market, you have to open a demat amount with a DP, who ensures that you can trade securities seamlessly. Besides, he also manages your demat account, provides you with research & insights about the stock market, and offers you a margin trading facility (MTF) to let you buy stocks with borrowed funds.
Naturally, you have to pay DP for his services, which is known as “what are dp charges.” There are various kinds of DP charges. For example, many DPs make you pay an account opening fee to open a demat account with them.
Then, you have to pay a brokerage fee to them to buy or sell securities. You also need to pay annual maintenance charges (AMCs) to them for record-keeping and other administrative costs. Now, let us learn how you can avoid paying DP charges.
Want To Avoid Dp Charges? Here Is What You Need To Know:
1. Dps Who Do Not Charge The Account Opening Fees
There are DPs who do not make you pay for account opening. So, you can open a demat account with them without paying the account opening fee. That said, you should not select a broker just because he does not make you pay the account opening fee. Instead, you should select a broker only if he provides you with the services you need and at a price you are comfortable paying.
2. Explore Intraday Trading
DP charges are payable only for delivery trades. In other words, such charges have to be paid when a buyer receives the delivery of securities. However, in intraday trading, you buy and sell stock within a trading day. Whatever asset you buy or sell in intraday trading does not get reflected in your demat account. Hence, you do not have to pay DP charges on intraday trading. However, you should not trade on an intraday basis just to avoid paying DP charges. Instead, you should do such trading only if you are proficient at it.
3. Buy Today, Sell Tomorrow (BTST)
BTST trading is similar to intraday trading. In BTST trading, you buy and sell shares before they get deposited into your open demat account. Hence, you do not have to pay DP charges.
4. Futures & Options (F&O) Transactions
Even in F&O transactions, you do not take the delivery of securities. Hence, you do not have to pay DP charges.
Conclusion
There are ways to avoid paying DP charges. As explained above, you can participate in segments like intraday trading, BTST, and F&O. However, apart from these types of trades, there is no other way to avoid paying DP charges.
Therefore, you should try to reduce your DP charges. For example, there are many discount brokers, who charge a nominal fee; however, they do not provide investment-related advice. In case you manage your investments on your own, you can open a demat account with a discount broker.
Even if you want to open an account with a full-service broker, you should thoroughly analyse its charges and compare them with the charges of other brokers.
Remember that you have to pay DP charges on a demat account even if you are not using it. Hence, if you do not need an account, you must learn how to close a demat account. Once it is closed, you will no longer have to pay DP charges associated with it.
