Stock Broking: Introduction, Stock Brokers, SubBrokers, Foreign Brokers

Stockbroking is a service which gives retail and institutional investors the opportunity to buy and sell equities.

Stockbrokers will trade shares both on exchange and over-the-counter, dependent on where they can find the best price and liquidity. Stock exchanges place strict regulations on who can trade shares directly on their books, which is why most individual investors hoping to trade shares will do so via a stockbroker.

Stock Brokers

A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks and other investments to financial market participants in return for a commission, markup, or fee, which could be based on a flat rate, percentage of assets, or hourly rate. The term also refers to financial companies, offering such services.

Share brokers in India are governed by the Securities and Exchange Board of India Act, 1992 and brokers must register with the Securities and Exchange Board of India. The National Stock Exchange of India and the Bombay Stock Exchange via brokers, provide an ecosystem to investors to trade in capital markets through various channels- broker offices, investment advisor or screen-based electronic trading system. An individual employed by an investment firm must complete the National Institute of Securities Markets (NISM) exam and apply to SEBI for registration as an Investment Advisor.

Stock market advisory and research services are highly regulated in India. Only SEBI registered stock advisory and investment research analysts are allowed to do so. The complete details of these authorized persons are available on website of SEBI for protection of investors.

There are several different services a stockbroker can provide:

• Advisory stockbrokers will offer advice on where to trade, but only trade on orders submitted by you.
• Execution-only stockbrokers will complete orders on your behalf, but do not offer any advice.
• Discretionary stockbrokers will trade on your behalf, executing trades without your input.

Stock SubBrokers

An Authorized Person (formerly known as a Sub Broker) is a person who is registered with SEBI as such and is affiliated to a member of a recognised stock exchange.

A Stock Market Sub broker or Stock broker partner is a Franchisee company who takes stock broking franchise from the franchiser. Some of the major Stock Broking Franchiser is Angel Broking, Sharekhan, Nirmal Bang & others.

The Sub broker or partner provides stock tips or stock recommendations to its clients based on his assessment of the industry. Some Franchiser provides stock recommendations to their sub brokers but most of them don’t.

Sub Brokers or partners keeps track of their clients & it is their headache to get the trading done from their clients so that they can earn high brokerage.

Benefits of becoming a Sub Broker:

Low Investment Business

A Stock Broking Franchise business can be started with minimum Rs.10,000 investment amount, only a security deposit is paid to the franchiser rest all expenses in incurred by the franchiser. In some cases the franchiser doesn’t even ask for a minimum deposit.

High Revenue Share

The Sub Broker or Partner keeps high percentage of the brokerage generated by the clients; the franchiser gets low brokerage percentage.

Advisory Support

Some Franchiser also provides Advisory, stock tips & recommendations to their sub brokers to help support their client & increase revenue.

Product, Service & Offers

Any new product, services & offers launched by the franchiser can also be availed by the sub broker. This helps the sub broker to keep engaging their client with new things.

Marketing & Training Support

The franchiser being a large organization also help the sub broker with all sorts of marketing support like providing banners, leaflets, hoardings for their branches. They also organize seminars for their broking partners to train them on various aspect of the business.

Foreign Stock Brokers

Stocks of company belonging to a geographical boundary are generally known of, to all the residents of the particular country. The Foreign Stocks however, are the securities of companies located outside one particular nature.

Giant companies which not based out from India are a profitable investment option, just like the blue-chip companies of India are considered to be.

Choose a broker based in India, but have links with foreign brokers. Among all the reputed and high class performing Indian Stock Brokers have direct links and tie with respective foreign brokers. An overseas trading account of such domain can be opened and operated easily, thereby having the means to invest in foreign stocks.

There is also a list of foreign brokers, who let Indian Traders invest in their stock markets. An account can be directly opened by them, making it easy to undertake direct investments in foreign exchanges. Some of the highly active brokers, also have their offices in parts of India, making it easy for the investors to visit them, seeking out for clarification of their query.

Some Indian Mutual funds and ETFs are as well-structured to invest in the foreign markets. So, investors can invest in such funds, where their investment goes directly to the foreign equities.

Investing Options:

• Investment across different nations is possible through international funds.
• Regional investment is as well facilitated through the Regional Funds, through which one can invest in regions like Europe, Asia, Middle East, etc.
• Sector investment is as well facilitated, where one can invest in sectors like gold, energy etc throughout a vast number of countries.
• Country wise investment is facilitated through country funds.
• ADRs and GDRs