The rise of the stock markets in recent years has seen an increase in many entities working in the areas of trading and investing. One of these entities is the sub-broker. In case an individual wishes to set up a sub-broker franchise, certain sub-broker franchise costs apply. Therefore, to fully grasp what a sub-broker does and how franchise costs are involved, it is worth learning some details about a sub-broker.
Who is a Sub-Broker?
In the stock market world, you know that you can open a Demat account with a broker like Motilal Oswal. A broker is an entity that facilitates your trading activity as well as takes care of certain investments for you. For example, a broker may offer you the services of opening a Demat account and a trading out, through which you can trade on the stock market or invest in a number of securities. You can even invest in mutual funds through a reliable broker.
Once you know what a broker is, it is simple to understand the concept of a sub-broker. A sub-broker operates in a similar way to that of a broker. You could say that a sub-broker is a type of “middleman” between a broker and a client. The broker, on the other hand, acts as a middleman between the stock exchange and the investor/client.
The Role of a Sub-Broker
The sub-broker can take up a franchise to perform activities and act as a go-between for the investor and the broker. The sub-broker has to bear certain “sub-broker franchise costs” when they work on behalf of a broker/brokerage. After a sub-broker franchise is established, a sub-broker becomes authorised to perform tasks like particular transactions of a financial nature. In typical cases, sub-brokers play the role of bringing clients to a brokerage to expand business operations. Sub-brokers also assist clients and investors in allocating capital to investment instruments like an upcoming IPO, for instance.
How Does a Sub-Broker Franchise Work?
As a sub-broker works to enhance the activities of a broker, except for any connection between the exchanges directly, a sub-broker has to be part of an agreement between the broker, the client and the sub-broker. This is effectively known as the “sub-broker franchise” - an agreement between three parties. Sub-broker franchise costs may include a registration fee that has to be paid to the broker that sub-brokers select to work with.
In this way, a sub-broker can register with the Securities and Exchange Board of India and become an official entity that is recognised in the financial arena. In India, registering with a good broker can make or break the career of a sub-broker, and registration costs may range anywhere from Rs. 50,000-1 lakh.
Sub-broking: A Profitable Profession
Becoming a sub-broker franchise can be profitable as a sub-broker may earn almost up to 60% of a brokerage fee in some instances. A sub-broker, after registration with a reputed broker is undertaken, may perform such tasks as having to open a Demat account for a client. They may also work to help certain clients with subscriptions to any upcoming IPO. According to the broker that a sub-broker chooses to work with and the percentage of the business they bring to the brokerage, sub-brokers can earn very well in India.
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