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Sub-Broker Meaning Explained
A sub broker is a person who acts as an intermediary between a stock broker and an investor in the stock market. A sub broker in stock market is not a member of the stock exchange, but is registered with the Securities and Exchange Board of India (SEBI) as an agent of the stock broker. A sub broker helps the investors to buy and sell securities through the stock broker, and earns a commission for the services rendered.
Also Read: Roles And Functions Of Sub brokers
A sub broker is a person who facilitates the trading of securities on behalf of a stock broker and an investor. A sub broker in stock market does not have a direct relationship with the stock exchange, but works under the supervision and guidance of the stock broker. A sub broker is required to obtain a certificate of registration from SEBI and follow the rules and regulations laid down by SEBI and the stock exchange.
In India, most broking firms have moved to online trading, making it as easy as signing up on a website to open a Demat account. However, this digital shift is new, and many investors still prefer in-person assistance to submit their KYC documents and set up a Demat account.
Once the Demat account is open, the sub-broker steps in to help clients make smart investment choices and ensure transparency in every transaction. For online stock brokers, sub-brokers serve as a link between clients and their platform because online brokerage firms can’t physically approach clients to open Demat accounts. So, sub-brokers work on behalf of these online brokers to bring in new customers and assist them with investments.
When they bring a new client onto the online platform, sub-brokers earn a prearranged commission based on the client’s transactions. The more significant the transactions, the higher the sub-broker’s earnings. However, it’s important to note that a sub-broker is not a trading member of the stock exchange but is authorised to act on behalf of a trading member who holds a valid Demat account.
Benefits Of Sub Broker In Stock Market
Some of the benefits of being a sub broker are:
– A sub broker can leverage the reputation and network of the stock broker to attract more clients and generate more business.
– A sub broker can enjoy the support and guidance of the stock broker in terms of training, compliance, technology, etc.
– A sub broker can access the research and analysis reports of the stock broker to provide better advice and recommendations to the clients.
– A sub broker can earn a steady income from the commission received from the stock broker for each transaction.
Also Read: Discount Broker vs Full-Service Broker: Which One Should You Choose?
Some of the challenges faced by a sub broker are:
– A sub broker has to comply with all the rules and regulations of SEBI and the stock exchange, which may be complex and cumbersome.
– A sub broker has to bear all the operational costs such as office rent, staff salary, electricity, etc.
– A sub broker has to face high competition from other sub brokers and online platforms that offer low-cost or free services to investors.
– A sub broker has to deal with various risks such as market volatility, client default, fraud, etc.
Eligibility Criteria to Become a Sub Broker
To become a sub broker, one has to fulfil certain eligibility criteria such as:
– The person should be at least 18 years old and should have passed 12th standard or equivalent examination from a recognized board or institution.
– The person should have good character and reputation, and should not have been convicted of any offence involving fraud or dishonesty.
– The person should have adequate infrastructure and manpower to carry out the business activities.
– The person should have completed a certification course approved by SEBI or NISM (National Institute of Securities Markets).
Registration Procedure to Become a Sub Broker
To register as a sub broker, one has to follow certain steps such as:
– The person has to apply for registration with SEBI through a stock broker who is willing to sponsor him/her.
– The person has to pay an application fee of Rs. 5000/- along with the application form and supporting documents such as identity proof, address proof, educational qualification proof, etc.
– The person has to undergo an interview conducted by SEBI or its authorised representative to assess his/her suitability for the role.
– The person has to pay an annual registration fee of Rs. 1000/- after getting approval from SEBI.
– The person has to enter into an agreement with the stock broker specifying the terms and conditions of their relationship.
Wrapping – Up
In simple terms, a sub-broker is like a middleman in the world of finance. They help people buy and sell stocks and other investments, but they do it through a main broker. Think of them as the bridge between you and the stock market, making it easier for you to invest your money. So, in a nutshell, a sub-broker is someone who assists you in trading stocks and investments through a larger broker.
