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Difference Between Stock Broker and Sub Broker

Difference Between Stock Broker and Sub Broker

The rise and fast-paced growth of the stock market have created numerous opportunities for potential investors to generate a steady stream of income.

Additionally, the integration of digital platforms has significantly transformed the stock market, diversified it, and has developed it into a financial hub that is facilitating a wide range of services and service providers, including stockbrokers and sub-brokers.

In the stock market, investors need the service of stockbrokers to invest in profitable shares and bonds. On the other hand, stockbrokers require services of sub-brokers to acquire more customers to increase their profitability and expand their business.

In this post, we will break down the role of a stockbroker and sub-broker, including the key differences.

Who Is A Stock Broker?

Stockbrokers are financial professionals who are involved in stock trading for their clients. Stockbrokers have also other names such as registered agents (RRs) or investment advisors.

In the stock market, stockbrokers work as intermediaries between average investors and the stock exchange. On the other hand, stockbrokers require services of sub-brokers to acquire more customers to increase their profitability and expand their business.

Brokerage firms and broker-dealer companies are often referred to as stockbrokers. This includes both full-service brokers and discount brokers, who perform trades but do not offer personalised advice on investment matters.

When it comes to online stockbrokers, most are either free to trade or discount brokers who offer their service in exchange for a small fee or a set commission. These days, many online stock brokers offer premium services, charging higher fees.

Who Is A Sub-Broker?

You may have heard the term sub broker, but still do not have a clear idea about what it does and how much a sub broker earns in India. A sub-broker serves as the intermediary between two parties, which are the stockbroker and investors.

On most occasions, a sub-broker represents a stockbroker, and they are responsible for introducing clients to the brokerage business. Besides, a sub-broker helps clients invest in and trade securities. In exchange, a sub-broker will get a percentage of the transaction as commission. The more transactions they make, the more they are likely to earn.

Difference Between Stock Broker and Sub Broker

While a broker and sub-broker carry out similar responsibilities, there are still certain differences. The main difference between stockbroker and sub-broker is that the former acts as an intermediary between investors and the stock exchange. A sub-broker, on the other hand, acts in the similar role between a stockbroker and clients.

Another difference between broker and sub-broker is their registration requirements. Stockbrokers are registered trading members of stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Stockbrokers are two types – full-service stockbrokers and discount brokers.

Sub brokers require a certificate of registration from the Securities & Exchange Board of India (SEBI) to trade in securities.

The SEBI has now discontinued the role of intermediary sub-brokers, and the registered ones need to migrate to the role of an “Authorised person.” From the perspective of practical business operations, the role of sub-brokers and authorised persons are identical. The only change has been in the registering party.

Generally, stockbrokers require a huge amount of capital to begin a stock broking business. It is because stockbrokers need to take care of many areas, including sales, marketing, administration, research, servicing, human resources, and more.

Sub brokers can start sub broking with a low investment, which usually ranges between Rs.50,000 and Rs.3,00,000. This amount might vary depending on which stockbrokers they partner with. Some stockbrokers even make offer zero investment offers to attract sub-brokers.

Stock Broker and Sub-Broker – Significance

A stockbroker has in-depth knowledge about the stock market and can advise when is the best time to buy and sell stocks. Their goal is to find customers with the best price. In exchange for making trades and providing referrals to clients, the broker receives a commission in the form of a fixed fee or a percentage of the value of the transaction. Stockbrokers also play a crucial role in the capital market chain.

The role of the sub-broker is also important. They give stockbrokers the ability to develop a large client base. This is why major brokerage firms encourage well-connected people to partner as sub-brokers. So it is a win-win for both sides.

Stock Broker vs. Sub-Broker – Earnings

Sub-brokers do the hardest part of setting up brokerage services to attract clients and retain them in the company for a long period, earning a higher percentage of income from those clients.

A stockbroker is a master broker that allows sub-brokers to operate under their own brand name. A broker provides all the support to sub-brokers to survive and run their business in this competitive market.

Stockbrokers receive a lower percentage of the revenue earned by the clients of sub-brokers. Since hundreds of sub-brokers and franchises work under stockbrokers, their earnings multiply.

Stockbrokers get paid through brokerage fees for their brokerage services and sub-brokers get theirs through commissions. The law outlines that only registered brokers listed on the stock exchange can charge brokerage fees, and sub-brokers cannot charge such fees.

Stock Broker and Sub-Broker – Benefits

The main benefit of stock broking is that you can develop a large client base by partnering with multiple sub-brokers, grow your business, and generate huge profits from brokerage fees.

Also, stockbrokers mostly assign the responsibility of research and client management to sub-brokers and only keep a tab of the developments.

One of the biggest benefits of becoming a sub-broker or being part of a sub-broker franchise is gaining knowledge and experience. Before starting, you need to know about the sub-broker franchise cost.

Working under a stockbroker provides sub-brokers the exposure or insights into various areas of the stock market that help them enhance their market knowledge and trading skills.

Although sub-brokers cannot function as stockbrokers, they can still trade privately with any stockbroker using their own funds. This self-sufficient method not only allows sub-brokers to provide better services to their clients but also lets them boost their investments.

Another benefit is that you do not require a high investment amount to become a sub-broker, as your franchiser takes care of most of the expenses.

Conclusion

If you were not clear about the difference between stockbroker and sub-broker, hopefully, this post will help you figure it out now. Although stockbrokers and sub-brokers are two different terminologies and roles in the stock market, their functions are more or less similar. If you want to get actively involved in the stock market, you need to know the differences between the two.

If you are interested to become a sub-broker by associating with a leading stock broking firm without any deposit, partnering with the Choice is a great option. Let us assist you to take the right steps towards a profitable sub broking franchise.

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