How to Become a Sub Broker in India?

In this blog, you will learn about How to Become a Sub Broker in India?

Sub brokership business has been one of the most sought-after business models, especially if you want to work in the stock markets.

The whopping rise in the number of Demat account holders by 34% in 2022 suggests this market’s opportunities.

As per recent reports of December 2022, there were 108 million Demat accounts in India.

So if you are interested in starting your journey as a broker and setting up your own business, this article is just for you.

In this article, you will read about how to start as a sub broker business and grow in this industry.

Become a Sub Broker in India – End to End Process

Lets have a detailed understanding on how to become a sub broker in India –

Eligibility Criteria for Sub Brokers

To become a Sub Broker, you must 1st know the eligibility criteria of sub brokership. One needs to fulfill certain criteria for starting a business as a sub-broker.

The criteria may vary as per the stock brokerage house you choose to associate with; however, the basic criteria remain the same.

The applicant for the sub-brokership needs to have at least cleared 10+2 examinations. However, many brokerage houses also ask for a graduation degree instead of only 10+2.
Sub-brokership applicants need to clear NISM exams for equities, commodities, Futures and options, and mutual funds. This is a mandatory requirement set by SEBI and stock exchanges for the sub-brokers.
Sub-broker needs to understand the stock market to make their prospective and existing clients understand the stock market products and services they are offering. Thus, every applicant must have at least a basic idea of the stock market, how the market works and brokerage charges, and others. While having in-depth knowledge or experience working in this market can be a huge plus.
The stock market is volatile and highly affected by political, geopolitical, and economic conditions; thus, the interested person should have updates on these issues and current affairs.
Apart from these, the applicant must know about computers and technology as they need to help the clients with the trading terminals and dealing in the market.
Then they must have good communication skills as the primary job of a sub-broker is to acquire new clients.

Process of Becoming Sub Brokers

So, if you possess the skills mentioned above and are interested in making your career in the stock broking industry, starting as a sub-broker has no comparisons.

The steps you need to follow to start a stock broking franchise are as follows –

A sub-broker is an agent of a stockbroker, and thus the first step is to find that stock brokerage house for whom you want to work. You need to check the market presence of the stock brokerage house. Then the commission they offer to the sub-brokers and the investment you need to put in as investment requirements vary from broker to broker. Also, you need to check the facilities, and support offered by the brokerage house to the sub-brokers. After comparing, you need to select one brokerage house you want to join.
Then you need to apply for the sub-brokership business model and wait for their approval. If they approve, complete the KYC process.
Then you need to make the required investment: the franchise fee and the infrastructure you need to make.
Once all processes are done with the stock brokerage house, they will help you register as a sub-broker with the SEBI, and then you can start your business as a sub-broker.

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Documents required to Become a Sub Broker

The documents you need to submit for the application and KYC process includes the following –

Identity and address proof such as AADHAAR, Voter ID where the name and address of the applicant are mentioned.
If the sub-broker already has experience in the business, then the experience certificate must also be submitted with the documents for KYC.
The franchise agreement between the sub-broker and the stock broker is another crucial document you will need.

Capital requirements for Starting a Sub Brokership

To start a sub-brokership business, you need to invest a certain amount of money, including the franchise fee and the investment in the infrastructure.

Now let’s see these costs in detail.

Franchise fee: This is a one-time fee many brokerage house charge for offering the sub-brokership rights to the applicant.
Initial deposit: There is a security deposit amount that some of the stock brokers take from the sub-brokers, which is adjustable against transactions.
Registration expenses: As you need to register with the SEBI to become a sub-broker, you need to keep registration expenses aside. However, the registration expenses are reasonable, around Rs. 3000.
Office space: Another important initial and recurring investment is the office space security deposit and rent. If you own your own space, then the purchasing cost will be the expense in that scenario.
Office furniture, computers, and other amenities: A sub-broker must have their trading terminal, for which you need to set your office up properly. You need to include the cost of furniture, internet set up, phone lines and others.
Staff salary: Another recurring expense of sub-brokers is the salary they must pay to their employees and staff members.
Utility bills: The electricity bills, phone bills, internet charges, and other utility expenses will be monthly expenses as well.

So if you are opting for a sub-brokership business model, you need to consider all these expenses to start and run the business smoothly.

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How to build the Stock Broker Franchise?

Now you know who can become a stock broker franchise, the steps of applying for the sub-brokership model, and the investment requirements.

However, the most important part of becoming a sub-broker and running the business successfully is how you handle the clients.

While client acquisition is important, client activation and servicing are equally important. You will receive a commission once and unless the client trades using the main stock broker’s platform.

So, you need to keep the clients satisfied with the services and help them trade in the initial days, at least if they still need to start trading.