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Starting a brokerage firm in India is an exciting venture into the thriving financial industryHowever, carefully planning this venture would be essential, Are you an experienced finance professional, an enthusiastic entrepreneur looking to make your mark, or perhaps both? Well, this article is the source of information you will need to understand and take actionable steps toward navigating the complexities in the brokerage industry. Let’s get started!
A brokerage firm is simply a place where investors and traders go to buy and sell stocks. The firm acts as a middleman between buyers and sellers and provides a trading platform for everyone. It charges a commission on these transactions. Every time an investor buys a stock, a transaction fee is charged.
You can also start a share broking franchise business (a sub-broker franchise) and give your company’s franchise to small and medium sub-brokers.
Knowing what is a brokerage firm is the first step toward understanding how to start a brokerage firm in India. However, the brokerage business also includes a sub-business opportunity known as a sub-broking franchise where entities assist brokerage firms in finding new customers and earning a commission in return. You can also start a share broking franchise business (a sub-broker franchise and give your company’s franchise to small and medium sub-brokers.
Earlier, brokerage services were only available at the physical offices of firms. It was when the Indian financial market followed an open outcry system. The investors had to be present physically at the stock exchanges to buy and sell stocks. The process was more based on luck as everyone shouted to place their orders. However, SEBI, in 1993 started the shift towards digital trading where it was mandatory to open a Demat account to hold the shares virtually. The circular started a digital revolution and resulted in the introduction of online brokerage firms.
To add the entities to create a brokerage business, SEBI created rules and regulations on how to open brokerage firms in India. By starting a brokerage firm, entities can onboard customers who want to open a Demat account and trade in included financial instruments. A brokerage firm assists its customers to buy and sell securities effectively, manage their Demat accounts and ensure their transactions are completed.
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.
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.
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.
The steps to set up an authorised partner firm are as follows:
After making a plan for the procedure, from business registration to the official opening, you figure out the approximate cost of each step. Both present cost and future requirements should be considered. These will comprise, for example, a base minimum capital deposit made to a stock exchange as an upfront payment for the registration process. The total cost will vary with your company’s unique circumstances.
The steps in setting up brokerage firms in India vary from one type of investor to another. Your share broking franchise company could be an expensive venture aimed at only the super-rich. On the other hand, it may act as a financial advisor for small companies and help and counsel prospective investors. Many firms now offer consulting services as part of their services as brokerage firms. They help purchase and sell shares. They are capable of general financial consulting, like where to invest, how much, and where to save.
Determining revenues is the other step in opening your brokerage. You determine how much you may charge your customers based on the market you want and your expenses. You must fix fees for both trading and advisory services. You may give free financial advice like many new brokerage businesses do in India. Depending on a different business model, you may charge clients for specific financial advisory services.
Learn what sets your brokerage company apart from the many others competing in the same target market. Would you focus on a niche area of financial guidance? Check what works best for you and the client you are looking at serving.
The applicant for registration will have to meet the norms set by the SEBI. The SEBI offers a standard registration certificate after setting a standard for issuing brokerage services. Both the clearing corporation and the stock exchange need to give them no objection. A registration application should be given through the concerned stock market that regulates it in the prescribed format. After the board is satisfied with the application form and additional paperwork, it will be granted a registration number and a certificate following proper work.
The broker will have to pay a membership fee. This is usually charged by the exchange where they intend to attend after approval from SEBI.
After membership, the applicant has to pay a base minimum capital deposit as security with the stock market. The deposit for those stock brokerage firms trading for their account by a non-algorithm method is ₹10,00,000. For those brokerage firms trading on behalf of their clients by a non-algorithm method, the deposit is ₹15,00,000. And for those doing both, the deposit is ₹25,00,000. The minimum requirement for a stock broker by an algorithmic trader will be ₹50,00,000. The brokerage deposit for non-national presence brokers will be 40%.
Those who wish to set up their brokerage firms will have to fulfil the following criteria:
A broking business is one of the most in-demand businesses at a time when the Indian financial market is adding a huge number of customers. As the investment amount is on the rise, starting a brokerage firm is one of the best decisions you can make. It will allow you to earn substantial brokerage through every completed order of the clients you onboard in your brokerage firm.
Now that you know how to start a brokerage firm in India, you are well equipped to start a broking business and start your professional journey in the stock market. However, there are risks involved in every business, and it is important to be wary of them. But keeping a positive mindset and an aware sight is what will make all the difference as an entrepreneur. You can also partner with organisations that ease the process for you, like India Infoline. This would benefit you as they have existing expertise and experience in the field.
IIFL offers one of the best sub-broker franchise models in the entire Indian stockbroking scene. A strong brand name, an intuitive tab-based advisory platform, cutting-edge trading platforms, and best-in-class research reports are some of the unique features that you get to experience by partnering with IIFL.
Become a Partner & Earn up
to 1 Lakh* per Month!
Starting a brokerage firm in India involves registering with SEBI, attaining necessary licences, and adhering to regulatory standards. Develop a robust business plan, construct a trading platform, devise risk management tactics, and concentrate on client procurement through compelling marketing and service offerings.
Profits from a brokerage firm fluctuate immensely depending on variables like commission rates, trading volumes, and client bases. A well-established firm can create sizable earnings, with some agencies profiting lakhs monthly. However, initial investment and operational expenses must also be considered before profit realization.
Yes, you can start an authorised partner franchise with IIFL Securities by applying forour Authorised Partner Program program. We furnish support, training, and access to their trading platform. You must meet their eligibility standards and conform to SEBI regulations to launch your sub-broking franchise successfully.
The expenditure to initiate a stock brokerage firm in India can vary from ₹10 lakhs to several crores. Expenses involve SEBI registration fees, infrastructure establishment, technological costs, compliance, and marketing. Financial planning and a thorough understanding of regulatory requirements are fundamental for accurate budgeting.
To initiate your own broking firm, start by conducting a market investigation and framing a comprehensive business plan. Register with SEBI, obtain necessary licences, and select a technology platform. Focus on compliance, client procurement strategies, and building a robust operational framework to ensure success in the competitive market.
Become a Partner & Earn up
to 1 Lakh* per Month!
