Brokerage, Demat & Account Setup
Level 1: Recognition Test
Time Limit: 20 minutes Total Marks: 30
Section A — Multiple Choice Questions (1 mark each) [10 marks]
Choose the single best answer.
Q1. A demat account is primarily used to:
- (a) Place buy/sell orders on the exchange
- (b) Hold securities in electronic form
- (c) Deposit cash margin with the broker
- (d) Pay statutory taxes to the government
Q2. Under the T+1 settlement cycle in India, if you buy shares on Monday (a normal trading day), the shares are credited to your demat account by:
- (a) The same day (Monday)
- (b) The next trading day (Tuesday)
- (c) Two trading days later (Wednesday)
- (d) The following Monday
Q3. Which of the following is a defining feature of a discount broker?
- (a) Provides dedicated relationship managers and research reports
- (b) Charges a percentage of turnover as brokerage with advisory
- (c) Charges a flat fee per trade with minimal advisory services
- (d) Does not require KYC for account opening
Q4. DP charges are levied by the Depository Participant when:
- (a) You buy shares
- (b) You sell (debit) shares from your demat account
- (c) You link your bank account
- (d) You complete KYC
Q5. DDPI (Demat Debit and Pledge Instruction) was introduced mainly to:
- (a) Replace the trading account
- (b) Give a limited, purpose-specific authorisation instead of a broad Power of Attorney
- (c) Eliminate all brokerage charges
- (d) Allow trading without a demat account
Q6. AMC in the context of a demat account stands for:
- (a) Automated Margin Call
- (b) Annual Maintenance Charge
- (c) Average Market Cost
- (d) Additional Margin Contribution
Q7. A contract note is a legal document that a broker issues:
- (a) Once a year summarising holdings
- (b) At the time of KYC completion
- (c) After trades are executed, detailing the transactions and charges
- (d) Only when the account is closed
Q8. Which document/process is a mandatory regulatory requirement before opening a trading and demat account?
- (a) A minimum investment of ₹1,00,000
- (b) KYC verification
- (c) A full-service broker subscription
- (d) A physical share certificate
Q9. A UPI mandate (e-mandate) in stock investing is typically used to:
- (a) Transfer securities between demat accounts
- (b) Authorise/block funds for transactions such as IPO applications
- (c) Calculate brokerage charges
- (d) Generate contract notes
Q10. A holdings/portfolio statement primarily shows:
- (a) The list of pending buy/sell orders
- (b) The securities you currently own and their quantities/values
- (c) The KYC status of the account
- (d) The broker's profit and loss
Section B — Matching (1 mark each) [8 marks]
Q11–Q18. Match each term in Column X with its correct description in Column Y. Write the pair (e.g., Q11 → iii).
| Column X | Column Y | |
|---|---|---|
| Q11. Trading account | (i) Holds shares electronically | |
| Q12. Demat account | (ii) Fee charged per debit of securities | |
| Q13. STT | (iii) Interface to place orders on the exchange | |
| Q14. DP charge | (iv) Securities Transaction Tax, a statutory levy | |
| Q15. Ledger statement | (v) Broad authorisation over the demat account | |
| Q16. Power of Attorney (PoA) | (vi) Running record of debits/credits of funds | |
| Q17. Full-service broker | (vii) Offers research, advisory and higher brokerage | |
| Q18. T+1 | (viii) Settlement one trading day after trade |
Section C — True / False with Justification (2 marks each) [12 marks]
State True or False (1 mark) and give a one-line justification (1 mark).
Q19. "A demat account and a trading account are the same thing."
Q20. "Under T+1, settlement happens on calendar days, so weekends and holidays are counted."
Q21. "Discount brokers generally charge lower brokerage than full-service brokers."
Q22. "DDPI gives the broker unlimited access to sell any security in your demat account for any purpose."
Q23. "A contract note has no legal standing and is only an informal message."
Q24. "Linking a bank account is necessary so that funds can move in and out of the trading account."
Answer keyMark scheme & solutions
Section A — MCQ (1 mark each)
| Q | Ans | Why |
|---|---|---|
| Q1 | (b) | A demat (dematerialised) account holds securities electronically; ordering is done via the trading account. |
| Q2 | (b) | T+1 means settlement one trading day after the trade; buy on Monday → credit on Tuesday. |
| Q3 | (c) | Discount brokers charge a flat/low fee per trade and offer minimal advisory; research & RMs are full-service features. |
| Q4 | (b) | DP charges apply on debit (sell) of securities from the demat account, per scrip, regardless of quantity. |
| Q5 | (b) | DDPI is a narrower, purpose-specific instruction replacing the broad PoA (for delivery, pledge, mutual funds, tendering). |
| Q6 | (b) | AMC = Annual Maintenance Charge, a yearly fee to maintain the demat account. |
| Q7 | (c) | A contract note is issued after execution, itemising trades, prices, brokerage and taxes; it is a legal record. |
| Q8 | (b) | KYC (Know Your Customer) verification is mandatory under SEBI regulations before account opening. |
| Q9 | (b) | UPI mandates authorise/block funds, commonly for IPO (ASBA-style) applications. |
| Q10 | (b) | A holdings/portfolio statement lists securities owned with quantity and value. |
Section A total: 10 marks
Section B — Matching (1 mark each)
| Q | Match | Reason |
|---|---|---|
| Q11 Trading account | (iii) | It is the interface to place buy/sell orders. |
| Q12 Demat account | (i) | It holds shares electronically. |
| Q13 STT | (iv) | Securities Transaction Tax — a statutory levy. |
| Q14 DP charge | (ii) | Fee charged per debit of securities. |
| Q15 Ledger statement | (vi) | Running record of fund debits/credits. |
| Q16 Power of Attorney | (v) | Broad authorisation over the demat account. |
| Q17 Full-service broker | (vii) | Offers research/advisory with higher brokerage. |
| Q18 T+1 | (viii) | Settlement one trading day after trade. |
Section B total: 8 marks
Section C — True/False with Justification (2 marks each: 1 T/F + 1 justification)
Q19. False. They are distinct: the trading account places orders, while the demat account holds the resulting securities. (1+1)
Q20. False. T+1 counts trading days, not calendar days; weekends/holidays are excluded. (1+1)
Q21. True. Discount brokers charge low flat fees (or zero on delivery) versus percentage-based full-service brokerage. (1+1)
Q22. False. DDPI is limited to specific purposes (delivery of sold shares, pledging, MF/tendering); it is not unlimited access. (1+1)
Q23. False. A contract note is a legally binding document evidencing the transaction and its charges. (1+1)
Q24. True. A linked bank account is required to add/withdraw funds for trading. (1+1)
Section C total: 12 marks Grand total: 30 marks
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{"claim": "MCQ + Matching + TF marks sum to 30", "code": "mcq=10; matching=8; tf=6*2; result = (mcq+matching+tf)==30"},
{"claim": "T+1 buy on trading-day 0 credits on trading-day 1", "code": "trade_day=0; settle_day=trade_day+1; result = settle_day==1"},
{"claim": "Section C question count times per-question marks equals 12", "code": "q=6; per=2; result = q*per==12"},
{"claim": "Total MCQ count is 10 at 1 mark each", "code": "n=10; mark=1; result = n*mark==10"}
]