What is a Sub Broker

Sub Broker Meaning

A sub-broker acts as an intermediary between a stockbroker and clients in the stock market. They assist in buying and selling securities but are not direct members of the stock exchange. Sub-brokers work under registered brokers, facilitating transactions and providing investment advice to clients.

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Who Is a Sub Broker?

A sub-broker is an intermediary in the stock market, working under the umbrella of a registered stock broker. Their role involves assisting clients in trading securities. While they don’t have direct access to stock exchanges, they operate using the main broker’s membership and follow strict market regulations.

A sub-broker is a key intermediary in the stock market, aligned with a registered main broker. They play a vital role in assisting investors with buying and selling of securities, acting as a bridge between the client and the market.

Sub-brokers don’t have direct access to stock exchanges; instead, they operate under the license and infrastructure of the affiliated broker. This arrangement allows them to facilitate transactions while adhering to the regulatory framework set by market authorities.

For Example: If Mr. Sharma wants to invest in stocks but lacks direct market access, he can approach a sub-broker. The sub-broker, under a main broker’s license, facilitates Sharma’s trades in the stock market.

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Sub Broker Example

Consider Mr. A, an investor eager to trade stocks but lacking direct market access. He approaches Mrs. B, a sub-broker associated with a licensed brokerage firm. Mrs. B helps Mr. A execute trades in the stock market, using her firm’s resources and regulatory compliance.

How To Become A Sub Broker?

To become a sub-broker, one must register with SEBI, the securities market regulator. This involves partnering with a registered brokerage firm, completing necessary training, understanding market regulations, and acquiring a thorough knowledge of trading practices and investment strategies to assist clients effectively.

Difference Between Broker And Sub Broker

The main difference between broker and sub broker is that a broker is a direct member of the stock exchange, authorized to execute trades, whereas a sub-broker acts as an intermediary under a broker, assisting clients with trading but lacking direct exchange access.

MembershipDirect member of the stock exchange.No direct membership; operates under a broker.
RoleExecutes trades on the exchange.Assists clients in trading through a broker.
AccessHas direct access to the stock exchange.Relies on the broker’s access for market transactions.
AuthorizationRegistered and regulated by SEBI or similar authority.Registered with SEBI but operates under the broker’s regulation.
Client InteractionCan deal directly with clients.Acts as a link between the client and the broker.

How Much A Sub-Broker Earns In India?

In India, a sub-broker’s earnings vary widely, typically comprising a percentage of the brokerage generated from client transactions. This commission can range from 20% to 50%, depending on the agreement with the main broker and client trading volume. The income isn’t fixed and can fluctuate.

Benefits Of Being A Sub-Broker

The main benefits of being a sub-broker include earning through commission on client trades, gaining valuable financial market experience, building a client network, and having the support of a main broker’s infrastructure without the need for direct stock exchange access or extensive capital investment.

  • Commission-Based Earnings: Sub-brokers earn a commission on each trade executed for clients. This performance-based income can be lucrative, especially with a large client base and high trading volumes, providing a steady income stream.
  • Market Experience: Working as a sub-broker offers extensive hands-on experience in financial markets. This role provides valuable insights into trading patterns, investment strategies, and market behavior, enhancing financial acumen.
  • Client Network Development: Being a sub-broker allows for the building of a broad client network. This network development is crucial for career growth in the financial sector, as a larger client base generally leads to higher earnings and reputation enhancement.
  • Broker Support: Sub-brokers benefit from the infrastructure and support of the main broker. This includes access to trading platforms, analytical tools, and administrative support, reducing the need for significant capital investment and allowing sub-brokers to focus on client servicing and expanding their business.
  • No Direct Exchange Access Needed: Unlike main brokers, sub-brokers don’t need direct access to stock exchanges. This significantly lowers entry barriers, as they don’t have to comply with the stringent requirements and high capital investment needed for direct exchange membership.
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Sub Broker Meaning –  Quick Summary

  • A sub-broker, operating under a registered broker, assists clients in trading securities in the stock market. They leverage the broker’s access and adhere to market regulations, but don’t directly interact with stock exchanges.
  • To become a sub-broker in India, registration with SEBI is required, alongside partnering with a registered brokerage firm. It necessitates completing training, understanding market regulations, and gaining deep knowledge in trading and investment strategies to serve clients effectively.
  • The main distinction is that brokers are direct stock exchange members authorized for trading, while sub-brokers, lacking this access, operate under brokers, aiding clients in trades as intermediaries.
  • In India, a sub-broker income primarily comes from commissions on client trades, varying between 20% to 50%. This depends on their agreement with the main broker and the client’s trading activity, leading to fluctuating, non-fixed earnings.
  • The main advantages for sub-brokers are earning commissions from client trades, gaining crucial market experience, expanding their client base, and utilizing a main broker’s resources without needing direct exchange access or significant capital.

Who Is A Sub Broker? – Faqs

What Is Sub Broker Meaning?

A sub-broker is an intermediary between a main stockbroker and investors, assisting in securities trading. They’re not direct stock exchange members but operate under a registered broker, aiding clients in executing trades and investment decisions.

How Much Does A Sub Broker Cost?

The cost of a sub-broker varies based on brokerage fees, which can be a fixed amount, a percentage of the transaction value, or a mix of both. Additional charges may include service and account maintenance fees.

Who Is Eligible For Sub Broker?

To be eligible as a sub-broker, one typically needs a minimum educational qualification, like a high school diploma, and must pass certain financial sector exams. Registration with regulatory bodies like SEBI in India is also required.

How Do Sub Brokers Make Money?

Sub-brokers make money primarily through commission on trades executed for clients. They earn a percentage of the brokerage fees paid by clients. Some also receive income from advisory services and by offering additional financial products.

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