Dematerialization (DEMAT) can be defined as the change from physical security certificates to electronic accounting.
Actual security certificates are then expelled and eventually retired from circulation in return for electronic accounting.
With the period of computers and the Depository Trust Company, stocks no longer require to be in certificate form.
They can be registered and moved digitally.
Via the process dematerialization, alleged DEMAT accounts enable for digital transactions when equities of stock are purchased and sold.
Inside a DEMAT account, the certificates for securities and other stocks of the user are held as a means for seamless trades to be made.
In prior times, exchanges at stock market exchanges were directed by traders who yelled buy and sell prices. The arrangements were recorded on paper receipts.
After the stock markets exchanged are shut, the paperwork would continue in order to properly register all the exchanges.
The introduction of dematerialization presented to kill such a paper-arranged procedure.
Moreover, by embracing digital accounting, this took into consideration records to be refreshed automatically and quickly.
Dematerialization applies not exclusively to stocks, but additionally to other types of speculation, for example, bonds, mutual funds, as well as government securities.
The utilization of dematerialization and DEMAT accounts is comparable to utilization a bank and bank accounts to keep up one’s assets rather as opposed to personally storing and trading paper money each time a exchange is made.