In order to begin trading in commodities in India, you will first need to have your own commodity trading account. If you have been doing any research into this matter, you will no doubt discovered that there are literally thousands of companies offering commodity trading services in India. Any one of these should be able to open a commodity trading account on your behalf. Many will also offer to open a demat account for you at the same time. The fees for this service will vary depending on which commodity trading broker in India you choose to deal with. Some will offer the account openings completely free of charge.
WHAT IS THE DIFFERENCE BETWEEN A COMMODITY TRADING ACCOUNT AND A DEMAT ACCOUNT?
A demat account is where electronic records of any shares in companies that belong to you are held. These are called equities. The demat account acts like a digital locker for keeping these safe and secure without the need for physical paperwork. If you already have a demat account, you can theoretically configure it in such a way that you can begin trading in commodities and equities in that very same account. However, if you never intend to trade in equities, you do not strictly need to have a demat account, as a simple trading account will be adequate for that.
HOW TO OPEN A COMMODITY TRADING ACCOUNT IN INDIA?
Once you have selected which commodity trading company in India you wish to use as your broker, you can ask them to set up a commodity trading account for you. Choosing the correct broker for yourself will depend on many factors, not least their charges and fees. While some may charge a fee for opening an account but then proceed to charge you a maintenance fee each month, others will charge for opening the account but not charge a maintenance fee. Others still may charge both, or neither of these fees. Some may simply charge on a ‘per trade’ basis, meaning that if you do don’t make any trades, you do not pay anything. However this may not be a good thing if you are planning on making a lot of trades. Speak to the brokers about available price plans and agree on what suits you the best.
Nowadays most traders have an online form that you can fill out from the comfort of your chair without having to visit the branch in person. After the submitted form is received by the broker, the regulators mandate that he must use the information provided in the form to assess the potential trader in regards to his personal experience, appetite for risk, and current financial position. The broker should be satisfied that the applicant will be able to survive financially even if he loses all that he invests. Some documents will also need to be seen by the broker.
WHAT DOCUMENTS ARE REQUIRED TO OPEN A TRADING ACCOUNT IN INDIA?
Before the account can be opened, your identity must be verified by the submission of several documents. These could be provided in person at the branch where the broker can take Xerox copies. Alternatively, some brokers allow scans of the documents to be uploaded via their website or attached to an email. Failing that, you may produce Xerox copies yourself and post them to the branch. The documents required will comprise of one photo ID proof (this should be your PAN card, as a PAN card is a prerequisite for anyone wishing to open a trading account), and one address proof (for this you could use an Electricity bill, Voter Id Card, Ration Card, Flat Maintenance bill, Telephone bill, Bank Passbook, Registered Lease or Sale Agreement for Residence, Bank statement not more than 3 months old, Driving License, Insurance copy or a Passport). The names, addresses and date of birth if shown on any of the documents must exactly match the details entered into the application form. As you can see from the above information, you should not be daunted about opening a trading account in India, as the process is really very simple.