What Is Cost Of Trade?
This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.
Cost of Trade: Definition, Meaning & Basics
Buying and selling of shares involves costs that an investor needs to pay. These costs have various components. Typically, an investor has to pay annual maintenance charges to her depository participant (DP) for the demat account that holds her shares and helps transfer them in case of a trade. Brokers who offer DP services charge for this separately to the investors.
Apart from this movement of shares from a demat account, buying or selling of shares is also chargeable, which may be included in the overall brokerage fee charged by a broker. Brokers charge transaction fees based on the value of transaction. However, some discount brokers charge a flat fee per trade.
Buying and selling of shares on stock exchanges is subject to Securities Transaction Tax (STT). Delivery-based purchase and sale of equity shares faces a levy of 0.1% STT.
Apart from these charges, every trade is also subject to stamp duty which varies from state to state.
Visit the Financial Terms section for more.