Short Answer Questions · Q6
Q.Distinguish between the old physical trading system and demat/online trading of shares.
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✓ Free question
The two systems differ across several dimensions:
| Basis | Physical trading (earlier system) | Demat / online trading (present system) |
|---|---|---|
| Form of holding | Paper share certificates | Electronic entries in a demat account |
| Transfer process | Manual registration by the company, taking weeks | Instant electronic book entry |
| Risk | Loss, theft, forgery, bad delivery | Minimal — records held securely with a depository |
| Trading venue | Physical trading floor/ring | Computerised Screen-Based Trading System (SBTS) |
| Settlement | Slow, paper-based | Fast, typically T+1 |
| Cost | Higher — stamp duty on transfer, courier/handling charges | Lower — largely paperless |
The move from the first system to the second, driven by depositories, Depository Participants and exchange-run electronic trading platforms, is one of the most significant reforms in the Indian securities market and a key topic in the AP Intermediate Commerce syllabus.
✓Final answer
Physical trading is slow, paper-based and risk-prone; demat/online trading is fast, electronic, and far safer and cheaper.
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