Brokerage, Demat & Account Setup

Q1 (10 marks)

(a) What each holds/does (2)

• Demat account: an electronic storage account (like a vault) that holds securities (shares, bonds, ETFs) in dematerialised form. It does not execute trades. (1)
• Trading account: the transaction account/interface used to place buy/sell orders on the exchange. It is a conduit, not storage. (1)

(b) Why both are needed (2)

• The trading account routes orders to the exchange and matches them. (1)
• The demat account is where bought shares are credited and from where sold shares are debited for delivery. Without demat you can't hold delivery; without trading you can't transact. (1)

(c) Entities (2)

• Demat ↔ Depository (NSDL/CDSL) via a Depository Participant (DP). (1)
• Trading ↔ Stock Exchange (NSE/BSE) via the Broker/Trading Member. (1)

(d) Flow trace (4)

• BUY 10 shares: trading account executes order → money debited from linked bank/trading ledger → T+1 shares credited to demat. (2)
• SELL 10 shares: trading account executes sell → 10 shares debited from demat for delivery → T+1 funds credited to trading ledger/bank. (2)

Q2 (12 marks)

Turnovers:

• Buy turnover = 200 × 150 = ₹30,000
• Sell turnover = 200 × 155 = ₹31,000
• Total turnover = ₹61,000

Gross P&L = (155 − 150) × 200 = ₹1,000 (1)

Charge lines:

1. Brokerage (per order, lower of ₹20 or 0.03% of order turnover): (2)

• Buy: 0.03% × 30,000 = ₹9.00 → min(20, 9.00) = ₹9.00
• Sell: 0.03% × 31,000 = ₹9.30 → min(20, 9.30) = ₹9.30
• Total brokerage = ₹18.30

2. STT (0.025% on sell turnover): 0.00025 × 31,000 = ₹7.75 (1.5)

3. Exchange txn charge (0.00297% on total turnover): 0.0000297 × 61,000 = ₹1.8117 ≈ ₹1.81 (1.5)

4. SEBI charges (₹10 per crore = 0.0001% of turnover): 0.000001 × 61,000 = ₹0.061 ≈ ₹0.06 (1)

5. Stamp duty (0.003% on buy turnover): 0.00003 × 30,000 = ₹0.90 (1)

6. GST (18% on brokerage + exch + SEBI): (2)

• Base = 18.30 + 1.81 + 0.06 = ₹20.17
• GST = 0.18 × 20.17 = ₹3.6306 ≈ ₹3.63

Total charges = 18.30 + 7.75 + 1.81 + 0.06 + 0.90 + 3.63 = ₹32.45 (1)

Net P&L = 1000 − 32.45 = ₹967.55 (1)

Q3 (10 marks)

(a) Monthly brokerage (4)

• Full-service: 0.30% × 25,000 = ₹75 per order × 8 = ₹600 (2)
• Discount: ₹20 × 8 = ₹160 (2)

(b) Break-even order value (4) Set full-service brokerage per order = discount flat fee: $0.003 \times V = 20 \Rightarrow V = \frac{20}{0.003} = ₹6{,}666.67$

• At an order value of ₹6,666.67, both cost ₹20 per order. (2)
• Interpretation: for order values above this, discount flat fee is cheaper; below it, percentage is cheaper. (2)

(c) Non-price reason (2) Full-service offers research/advisory, relationship manager, IPO handholding, offline/branch support — value for hands-off investors. (any valid) (2)

Q4 (10 marks)

(a) Definitions (3)

• T = trade day (order executed on exchange). (1)
• T+1 = one working day after trade; settlement day when securities/funds are exchanged. (1)
• On T obligations are created; on T+1 shares credited to buyer's demat and funds to seller. (1)

(b) Buy on Wednesday (3)

• Trade day T = Wednesday. Settlement T+1 = Thursday: shares reflect settled in demat Thursday. (2)
• Money is blocked/debited on trade (T = Wednesday) at execution / adjusted on settlement — shares free on Thursday. (1) (Accept: funds debited on T, shares delivered T+1 Thursday.)

(c) Sell on Friday (4)

• T = Friday. T+1 skips non-settlement days Sat & Sun. (2)
• Next working/settlement day = Monday, so funds settle to the seller on Monday. (2)

Q5 (10 marks)

(a) Contract note vs ledger (4)

• Contract note is the legal confirmation of each trade issued by the broker, digitally signed, showing exact price, time, charges — it is the primary evidence of the transaction and is legally enforceable/tax record. (2)
• Ledger statement is a running account of all debits/credits (funds, charges, payouts) over a period — it aggregates, does not confirm individual trade terms. Contract note = per-trade legal doc; ledger = cumulative money movement. (2)

(b) POA vs DDPI (4)

• POA: broad power of attorney historically giving broker wide authority over the demat account (could move securities for various purposes) — higher misuse risk. (2)
• DDPI (Demat Debit and Pledge Instruction): SEBI-mandated limited authorisation restricted to (i) delivery of sold shares and (ii) pledging for margin — cannot be misused for other transfers, hence safer. (2)

(c) Definitions (2)

• Average buy price: total cost / total quantity held (weighted average of purchase prices incl. costs). (1)
• Unrealised P&L: (current market price − average buy price) × quantity held; profit/loss on paper, not yet booked. (1)

Q6 (8 marks)

(a) DP charges (3) 6 sell transactions × ₹15.93 = ₹95.58 (3)

(b) AMC incl. GST (2) 300 × 1.18 = ₹354.00 (2)

(c) Total & reasoning (3)

• Total = 95.58 + 354.00 = ₹449.58 (1.5)
• DP charges apply on debit (sell) because securities leave the demat account, incurring a depository transaction/processing charge; buying only credits shares, so no DP debit fee is levied (charges are on securities exiting the account). (1.5)

[
  {"claim":"Q2 net P&L = 967.55", "code":"buy_to=200*150; sell_to=200*155; tot=buy_to+sell_to; gross=(155-150)*200; brok=min(20,Rational(3,10000)*buy_to)+min(20,Rational(3,10000)*sell_to); stt=Rational(25,100000)*sell_to; exch=Rational(297,10000000)*tot; sebi=Rational(1,1000000)*tot; stamp=Rational(3,100000)*buy_to; base=round(float(brok),2)+round(float(exch),2)+round(float(sebi),2); gst=0.18*base; total=round(float(brok),2)+round(float(stt),2)+round(float(exch),2)+round(float(sebi),2)+round(float(stamp),2)+round(gst,2); net=round(gross-total,2); result = abs(net-967.55) < 0.02"},
  {"claim":"Q3 break-even order value = 6666.67", "code":"V=20/0.003; result = abs(V-6666.67) < 0.01"},
  {"claim":"Q3 full-service monthly=600, discount=160", "code":"fs=0.003*25000*8; ds=20*8; result = (fs==600) and (ds==160)"},
  {"claim":"Q6 total demat cost = 449.58", "code":"dp=6*15.93; amc=300*1.18; result = abs((dp+amc)-449.58) < 0.001"}
]