With the phenomenal growth of the Indian stock market, there are myriad opportunities for building desirable gains in all spheres, and this is the main reason behind the massive upsurge in the number of investors across niches. Such a boom has also accelerated the need for reliable and skilled brokers and the sub-brokers stock market. If this is an opportunity that you want to explore, you certainly have several questions, beginning with – what is sub-broker after all?
In this article, we will explore in-depth what is sub-broker in the share market, along with the details of the sub-broker business model in India. While the process of becoming a sub-broker and understanding the profession becomes quite easy if you have the best brokerage firm to assist you in the process, you can also gain some useful insights from this piece.
What is Sub Broker in Share Market?
According to the National Stock Exchange, a Sub Broker is “any person who is not a Trading Member of a Stock Exchange but who acts on behalf of a Trading Member as an agent or otherwise for assisting investors in dealing in securities through such Trading Members.”
These “Trading Members” must enter into an agreement with all sub-brokers, and this agreement should pinpoint in absolute detail what the rights and responsibilities of both parties are. All sub-brokers must obtain registration with SEBI before they start their operations.
Sub brokers are not much different than brokers in terms of their role, both act as intermediaries in investment trading. The only difference between broker & sub broker is that the sub broker mediates between the stock broker and the client. Sub brokers usually work for brokers by bringing new clients to the firm and assisting in investments and security dealings. It is in such transactions that they also earn some commission.
Everything You Need to Know about the Sub Broker Business Model
A business model with lots of potential for success, sub broking has managed to attract the attention of many, especially from younger generations. Currently, India has a very limited number of brokers, to the tune of 50s, who are officially listed as members of the Stock Exchange. This makes it clear that though becoming a broker is very promising financially, it comes with limited opportunities and heavy expenses.
This is where the sub-broker fits in. A sub broker business model relies on bridging the gap between limited funds and the growth of the market. A share market sub-broker takes resources provided by the broker, including investment amounts, strategies, and miscellaneous facilities, and uses these to help clients make bigger profits on their investments.
Essentially, the sub-broker brings and maintains clients for the broker, while their business franchise continues to offer them greater profits as their experience, business, and clientele grow. The sub broker business model has now expanded from merely a secondary market equity business to a complete assortment of services spanning several financial avenues. Sub brokers must advise their clients on investments as diverse as equities, commodities, currency, mutual funds, PMS, and so on.
Knowledge is wealth when it comes to sub brokers. Here on, you may either choose to work as an independent advisor, which means how much a sub broker earns in India will be limited only by their ability to bring in clientele and increase trades, or you may work in association with a stockbroking firm instead. If you choose the second option, the firm will incentivize you regularly for consistent performance, besides rewarding you with your commission on trades and bringing in clients. Undoubtedly, the second business model offers not just greater stability and security, but also more income opportunities.
Here’s What You Need to Start Your Sub Broker Business
To understand how to begin your business as a stock sub-broker, you first need to determine the necessary qualifications and preparation you must have. The following are some prerequisites, some mandatory while others recommended if you wish to start your journey in the stock market sub-broker business.
- Must have completed at least 10+2 studies, as per regulations. However, we would recommend you complete your graduation, if possible, before entering the sub broking business.
- Must possess adequate knowledge of financial markets, either obtained through formal education or prior work experience or other knowledge resources. There should be a basic understanding of financial transactions.
- Must be equipped with the latest ongoings in the fields of economics, politics, and environment, if possible, even on the international level. Any news that is directly related to or could affect the stock market must be taken cognizance of.
- Must know how to operate computers on a basic level.
- Must possess good communication skills because interacting with customers and winning their trust is always a priority in the sub broking business.
- Must clear basic NISM modules on equities, mutual funds, commodities, F&O, and so on, according to the regulations. One cannot start sub broking activities unless they have cleared the requisite modules.
Apart from the above, one also needs to keep in mind the capital requirements and working expenses that revolve around a sub-broking business model. In fact, as an entrepreneur who has just stepped into the field, this is the point that could matter the most for you.
For instance, you will need to make an initial deposit with the main broker, besides one-time charges for registration, procuring the necessary equipment or workstation, and so on. Monthly expenses when carrying out a sub broking business will include bills for internet, phone, office rents, staff salaries, and other utility bills.
The Step-By-Step Guide to Starting Your Own Sub Broker Business
Once you have decided on beginning your own business as a sub-broker and have gone through the basic requirements for initiating the same, you should investigate in detail the steps involved in starting a sub-broking business in the stock market.
The first step to do that is to choose the best stock broking firm with which to tie up your business. Presently, there are several stock brokerage firms in India to choose from, but your choice must be guided by a few key factors, including the day-to-day operations you will be involved in, the incentives offered, and more. You should also pay due attention to the kind of networking, experience, digital stronghold, and product offerings that the brokerage firm in question facilitates.
At the end of the day, all these factors will have a pronounced impact on your sub-broker business model. Always ensure that you are looking into the certainty of growth of the stockbroking firm you are interested in. Choice, for instance, could turn out to be the ideal haven for sub-brokers looking to establish a successful business franchise that guarantees them both regular incomes, an impressive clientele, and the freedom to work for themselves.
After you have chosen the stockbroking firm you wish to work with, there are other details that you might want to investigate, including the registration process, eligibility, and documents required for registering as a sub-broker, application, and scrutiny process, and finally, the certificates and licenses involved.
The Bottom Line
Sub broking is one of the most promising avenues for business growth, offering brilliant revenue opportunities for people of all ages and backgrounds. With just a few details and requirements to take care of, you can conveniently begin working as a sub-broker and reap the rewards of this challenging yet exciting career.
A few years down the line, you might even want to set up your sub broking franchise, with a thriving business of your own. However, always remember that working with equal merits for a stockbroker will offer you incentives for excellent performance over and above the commission you make, provided you have established consistent and increasing cash flows. You earn more per trade and allow the broker to earn their brokerage – a win-win for both of you.
Being a sub-broker has an impressive range of benefits lined up for you, if only you understand well how to explore them. Expand your knowledge base and start using it as the wealth you share with your clients. Join hands with Choice today and use our expertise to benefit and grow with us while we put your talent and skills to use. Get in touch today!