Q.Describe the process of dematerialisation and online trading of shares.

A quick version should mention opening a demat and trading account, screen-based order matching, the contract note, and T+1 settlement. …

Before dematerialisation, all shares in India were held and transferred as physical certificates, which caused problems such as loss, theft, forgery, delayed registration and 'bad delivery'. The move to dematerialisation and online trading was designed to solve these problems.

Dematerialisation converts an investor's physical share certificates into an equivalent electronic holding in a demat account. Depositories hold these electronic records, and every investor accesses a depository through a Depository Participant (DP) — typically a bank or a stockbroker — who opens and services the demat account.

The online trading process then works as follows:

1. Account opening. The investor opens a demat account (to hold securities) and a trading account (to route orders) through a registered broker/DP, after completing the required identity and address verification.
2. Placing an order. The investor places a buy or sell order — specifying the security, quantity and price — through the broker's trading terminal or trading app, which is connected to the exchange's Screen-Based Trading System (SBTS).
3. Order matching. The SBTS automatically matches buy and sell orders on the basis of price and time priority, without any manual intervention, and confirms the trade the instant a match is found.
4. Contract note. The broker issues a contract note to the investor, showing the price, quantity, brokerage and other charges for the trade. …

A common gap in essay answers is describing dematerialisation alone and omitting the trading-and-settlement steps (order matching, contract note, T+1 …