Authorised Person on personal trading

Can an AP trade his own capital through client accounts ? is it legal or is it still in the grey ?

For e.g , a trader has 10 Lakhs of personal capital and places 2 trades per day (2 X 40 = Rs 80 brokerage /day)

So instead of trading 10L from his own personal account , he registers as an AP and brings on 20 accounts
( family and friends )
and spreads this 10L into 20 - 50K accounts.
Now placing 40 trades per day ( 2 X 20 ) and generating Rs 3200 brokerage .For which the AP well get 50% pass back.
So this way he is able to earn more from the brokerage pass back than before.

My question is that=>> is this allowed or is it illegal ? @siva @nithin

I’m asking this because I have strategies that generate high volume without loss of capital at the end of the year ( of course there are drawdowns but over the long run it break evens or small profit). And high volume generating strategies are fantastic to earn high brokerage revenue from. But the only clients I could bring are my friends and family and I will have to provide the capital financing of their account. So I want to clarify wether such a AP model is allowed because I don’t want to break any rules.

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Trading on others accounts isn’t allowed, even if you are an AP.

Check this

By the way it is your money why would you want to earn money as brokerage? You rather focus on making trading profits without generating too much brokerage right?

Yes , true. Focusing on profits is critical. @nithin

But I had developed a few quant based algos that were decent in terms of profitability(1-1.5X max drawdown after brokerage and STT and other charges ) but had large volume ( 80-100 trades per day ).

So I figured it will be more lucrative to monetise the large volume generating aspect of these strategies through a high churn rate with an AP / sub broker model. Considering the ROI of the strategy is not high but because of the 1000s of trades placed on a monthly basis , it will be a good source of brokerage revenue.

If I set up algos for each client account and take consent for monitoring the trades , will it then be possible to pull this AP model off ? I’m confident about the trading but I’m not aware of the legal aspects of these things , if it is straight up not legal I will scrap the idea obviously .

Trading on other accounts is a regulatory issue.

So when you were a sub broker and managing other people’s capital , how did you manage the regulations back then? @nithin

Most of these regulations are post-2008 financial crisis era.