What Is The Difference Between A Broker And A Sub Broker?

A stockbroker can either be a registered stockbroking company or an individual. They buy and sell securities on their client’s behalf and charge brokerage fees. They act as a vital link between investors and the stock exchange by facilitating transactions. To understand the difference, here are the types of stockbrokers:

• Full-Service Stockbrokers:

  These stockbrokers provide comprehensive services to clients, including providing advisory assistance. They can help an investor gain insight into investment opportunities. Typically, their brokerage fees are based on the total amount of executed trades. These are generally well-established market players, with a range of network offices/branches across the country.

• Discount Brokers:

  They charge comparatively lower fees as compared to full-service brokers. Their services don’t include advisory assistance or market research to help clients zero in on a suitable investment opportunity. Usually, they charge a flat fee for undertaking stock market transactions.

• Brokers Charging Flat Brokerage:

  These types of stockbrokers have gained popularity because of the increasing use of digital technology in trading. They are a mix of both full-service and discount stockbrokers, charging a flat rate brokerage fee.

What Is Sub-Broker?

Now that you have understood the difference, the next factor is the sub-broker. A sub-broker(Authorised person) is an agent of a broker, working with the client, on their behalf. They act as a link between the stockbroker and the client. A stockbroker entrusts the sub-broker with multiple responsibilities, like sourcing clients, providing services and client management. Sub-brokers receive a portion of the fees collected by the stockbroker. The difference extends to the fact that stockbrokers can have a wide network of operations across the country via different sub-brokers, who identify and acquire new clients for the stockbroker. Now that you know what is sub-broker(Also known as Authorised person), the next step is to understand in detail the difference through a comparative analysis:

What is the difference between a broker and a sub-broker in the share market?

• Broker Vs Sub-Broker Function:

  A stockbroker functions independently, while a sub-broker acts as an intermediary between the main stockbroker and its clients. A sub-broker is primarily entrusted with the responsibility of expanding the business network of the original stockbroker. Stockbrokers usually also act as Depository Participants (DPs) of the National Stock Exchange’s (NSEs)-promoted National Securities Depositories Ltd (NSDL) or the Bombay Stock Exchange’s (BSEs)-promoted Central Depositories Securities Ltd (CDSL). Here, you must remember that both depositories maintain stocks and securities in an electronic format. On the other hand, a sub-broker cannot be a DP.

• Stockbroker vs sub-broker Registration:

  A stockbroker has to be registered with SEBI. While initially, sub-brokers were also to be registered with the SEBI, the market regulator, since August 2018, has discontinued sub-broker as a category for registration. In its circular dated August 3, 2018, all existing sub-brokers had to migrate to the category of ‘Authorised Person compulsorily.’ According to the SEBI, an Authorised Person can be an individual, firm or other entity which is appointed by a stockbroker. These can provide access to a trading platform of a stock exchange by acting as an agent of the stockbroker.

• Broker Vs Sub-Broker Revenue Sharing:

  • Sub-brokers have a wide range of responsibilities, thereby entitling them to a higher share of revenue generated via the clients. Though the main stockbroker gets a smaller share of the revenue, it has access to overall large revenue generated by scores of sub-brokers.

Also read, How Much Sub-broker Earns in India?

• Stockbroker vs Sub-broker Brokerage

  Stockbrokers charge direct brokerage fees from clients, while sub-brokers are not allowed to charge brokerage fees from clients directly. Sub-brokers receive the specified portion of the revenue from the stockbrokers.

• Broker Vs Sub-Broker Importance:

  Stockbrokers play a vital role in the stock markets by ensuring sufficient availability of liquidity. They have a key place in the capital markets ecosystem. Sub-brokers, on the other hand, are vital for stockbrokers for the expansion of their businesses across regions. A stockbroker provides opportunities for new people to enter the financial market as agents by providing access to the stockbroking firm’s cutting-edge trading tools and other services. Sub-brokers have to typically provide a deposit fee with the stockbroker.

Conclusion

Thus, while investing in stock markets, it is essential to know the what is the difference between a broker and a sub-broker. Both play a distinct role in the functioning of stock markets. They share some common features as well as differences. While beginning your investment in stock markets, always rely on a trusted and reliable financial partner. Look for features such as an all-in-one trading platform to invest in different stock market options, brokerage cashback and zero Demat AMC for up to a year.