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Sub Broker Franchise without deposit - All you need to know


Investing in the stock markets has become highly popular, especially after the availability of online stock trading platforms since the Covid-19 pandemic. However, as per the SEBI (Securities and Exchange Board of India) guidelines, retail investors and institutions and not allowed to trade directly in the stock exchanges. Instead, they need to take the help of the stockbrokers or sub-brokers.

The stockbrokers and sub-brokers play an extremely crucial role in the stock trading ecosystem. Stockbrokers are licensed professionals or firms authorised to execute trades in the stock markets on behalf of investors. They may also offer additional services such as research reports, market analysis, and investment advisory. 

Sub-brokers, on the other hand, are individuals or entities who act as intermediaries between the stockbroker and the investor. They are authorised to place buy and sell orders in the share markets but operate under the banner of a SEBI-registered stockbroker. Sub-brokers can operate individually or as a sub-broker franchise under a stockbroker.


Understanding the initial security deposit

The initial security deposit is one of the prerequisites for starting a sub-broker business. It refers to a one-time fee demanded by the stockbroker to allow an individual to operate as a sub-broker under its banner. The stockbroker returns this initial security deposit to the sub-broker upon the termination of the contract.

Below are the primary characteristics of the initial security deposit:

  • It protects the stockbroker against potential delays or defaults in payments
  • Typically, it is refundable upon the termination of the sub-broker contract
  • The deposit can be made in the form of cash or shares
  • The deposit amount plays a pivotal role in determining the commission-sharing structure between the stockbroker and the sub-broker. A higher deposit amount may result in a higher commission percentage for the sub-broker
  • Although it varies from stockbroker to stockbroker, the initial security deposit may range between Rs. 1 lakh to Rs. 3 lakhs
  • The initial security deposit is usually a prerequisite to starting a sub-broker franchise


Sub-broker franchise without a deposit – Is it possible?

Traditionally, becoming a sub-broker required a significant initial deposit. However, some brokerage firms these days offer sub-broker franchises without this financial barrier. Such an approach appeals to aspiring entrepreneurs with limited capital. However, stockbrokers may levy certain exclusive terms and conditions for providing a zero-deposit sub-broker franchise. Additionally, the stockbrokers may also analyse the sub-broker’s reputation and clientele while determining the initial security deposit amount.


Advantages of a sub-broker franchise without deposit

Below are a few advantages of starting a sub-broker franchise without the initial security deposit:

  • No initial investment

It is the most notable advantage of a sub-broker franchise without a deposit. It eliminates the need for an initial investment, making it easier for individuals with limited financial resources to start a business.

  • Risk mitigation

Without the financial burden of paying a security deposit, you can focus on building your client base and honing your skills without the fear of losing a substantial investment.

  • Access to resources

By partnering with an established stock brokerage firm, you gain access to resources such as research reports, trading platforms, and technical support, among others. These resources enhance your ability to serve your clients better.

  • Higher earning potential

When you do not have to submit an initial security deposit, you stand a chance to make more earnings. You can enter into a revenue-sharing agreement with the sub-broker and earn higher income without any initial investment.


Factors to consider before starting a sub-broker franchise without a deposit

Below are the factors you must consider before starting a sub-broking business without an initial security deposit:

  • Research well

Thoroughly research the reputation and track record of the stockbroking firm offering the franchise. Look for reviews, testimonials, and any complaints against the brokerage house.

  • Legal and regulatory compliance

Ensure that the stockbroking form is registered with the relevant regulatory authority, such as the SEBI. It helps you protect your interests as well as your clients.

  • Revenue-sharing terms

Carefully review and discuss the revenue-sharing terms with the stockbroker to understand how much you can earn within a month or year.


The final word

In today’s competitive market, several stockbrokers allow sub-broker franchises without a deposit to attract more clients and expand their business. It is a viable pathway for individuals looking to venture into the sub-broking business without the burden of high initial deposits.


Related Blogs: Roles and Function of a Sub Broker | Sub Broker Franchise Without Deposit | GST Compliance On Stock Broking Services | Sub Broker Business Model | Roles and Responsibilities of Sub-Brokers


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