A sub-broker operates as an agent for a broker, bringing in new clients for the broker to work with. In exchange for the introduction of new customers, a sub-broker is entitled to a cut of the profits made by the broker.
This article covers all the aspects of a Sub-Broker with the help of the following sub-topics.
- Who is a Sub-Broker?
- Sub-Broker Franchise
- How Much a Sub-Broker Earns In India?
- Can a Sub-Broker Trade for Himself?
- Difference Between Broker and Sub-Broker
- Quick Summary
Who is a Sub-Broker?
A sub-broker is an agent of a broker, i.e., he introduces new clients to the broker. A sub-broker gets a certain percentage of profit-sharing from the broker for introducing new clients. You can become a sub-broker by obtaining a certificate of registration from the SEBI. It is mandatory for the sub-broker to enter into an agreement with the broker as specified by SEBI.
You might have seen small stores of brands like PUMA, ADIDAS, etc., in your city. The Company PUMA or ADIDAS does not own these stores. They are owned by someone else in the form of the company’s franchisee that sells the same products as the Company PUMA or ADIDAS.
Well, the same goes for Stock Brokers. They have franchises owned by Sub Brokers.
The franchisee model exists because the stock brokers cannot have their presence in every city of the country. Generally, in this model, the broker sets up predefined infrastructure and territorial criteria.
On the other hand, territorial criteria restrict the sub-brokers to have only one franchisee in a specific territory, eventually helping the sub-brokers gain more visibility.
The Sub Broker Franchise helps the clients in:
- Account Opening
- Trading Terminals
- Call and Trade Services
- Resolving Issues etc.
Online stock broking in India has revolutionized the overall stock broking industry, and Sub Brokership is no exception. Even the traditional brokers have almost discarded the franchisee model and opted for online sub-broking models.
Example of online sub-brokers: Online Stock Market Educators. These educators teach their students how to trade and encourage them to open an account with the partnered broker.
How Much A Sub-Broker Earns In India?
Usually, Sub Brokers in India earn on a percentage-sharing basis. Here’s how it works:
- Sub broker introduces a client to the broker.
- The client starts trading and starts paying brokerage to the broker.
- The brokerage is split between the sub-broker and broker on a percentage basis.
For a much better understanding, let’s take a look at an example:
- Mr. Ram Bharose is a sub-broker of Alice Blue India and has a brokerage sharing of 75%.
- He introduces around 100 clients. These clients trade and pay an overall brokerage of ₹50,000 to the broker.
- Then the broker will share ₹ 37,500 (75% of ₹ 50,000) with Mr. Ram Bharose (sub-broker).
Can a Sub-Broker Trade for Himself?
Yes, the sub-broker can trade for himself and earn profits. In fact, it is pretty easy for the sub-brokers to trade as they deal with the stock markets throughout the day.
Any Legal Restriction?
No. A sub-broker is not restricted from trading in the stock market.
Difference Between Broker and Sub-Broker
There are very few differences between a broker and a sub-broker. The main difference is that the broker is a large entity, and a sub-broker is a part of that entity that helps the broker reach a larger audience.
|Meaning||The broker provides trading services to its clients.||Sub-broker introduces new clients to the broker.|
|Registration||The broker is registered as a trading member of the stock exchange.||Registered with SEBI as a sub-broker.|
|Initial Investment||High investment required.||Low investment required.|
|Brokerage||Charges brokerage directly from the client.||Gets a certain part of brokerage from the broker.|
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:
- A Sub Broker is similar to an Insurance Agent. He introduces new clients to the broker.
- Sub Broker Franchise helps the clients access trading terminals, open accounts, call and trade services, etc.
- Sub broker earns money via brokerage sharing or by trading for himself.
- A sub-broker can trade for himself and earn profits in fact, it’s quite easy for them as they deal with the stock markets throughout the day.
- The main difference between a sub-broker and a broker is: a broker is a large entity, and a sub-broker is a part of that entity that simply helps the broker to reach a larger audience.