Assume you have perfected your craft after years of trading using your capital. Now, If you wish to create a legal entity to trade capital markets and there is an investor willing to put in equity capital, what legal entity is the best way forward? I am not talking about AIF or any pooled funds nor do I want to become an NBFC. I will not be taking in any new investor capital. But I will be using derivatives. Someone guide me please.
Under what entity does Dolly Khanna, Rakesh Jhunjhunwala etc trade?
As per my findings both the name you mentioned invest in their own name and not through any entity. If they were doing day trading & FnO then they are not doing it using their own name.
If you are seriously considering trading then Pvt Ltd company can be advised as income tax is lower for corporate and it can have its own individual identity and easier to collaborate.
An Authorised person (earlier sub broker) can trade with their funds in a prop account. They just cannot accept money from public. So a pvt ltd company can trade with its own funds if it becomes an Authorised person with a broker.
Similarly if the pvt ltd company becomes a trading member
or stock broker at the exchange it is possible to operate a prop account without NBFC license.
Not very sure here. But I know when the company changes it’s object clause in MOA for the purpose of trading, the application gets rejected from ROC with remark “Kindly upload NBFC licence”
Again not very sure if it happens when the company becomes a trading member as stated by you.
Trading members at the exchange have been running prop desks for years. In recent years some top stock brokers stopped this to look good to the customer. Thats all. They probably have other entities to run their prop desks which legally is another entity
RBI NBFC 50:50 rule doesn’t apply to stock brokers / sub brokers now Authorised persons.
Not very sure, but isn’t the cost to get such membership from exchange also expensive. I have read couple of posts from Mr. Nithin where he himself says that it comes with a huge cost.
To register as an AP of a broker is not costly at all. Only when one wants to become a full service stock broker the cost mentioned by Mr.Nithin kick in.
