Broker Quotes and Bid/Ask spread

Hi,

Are the quotes shown on broker trading platforms broker quotes or quotes from the market.Meaning do the trading member see different quotes than the quotes seen by clients of trading members ?

Apart from brokerage, do brokers earn from requoting market quotes with higher bid/ask spread or are brokers legally bound to execute at best market quotes ?

Nopes, in India the market depth is directly streamed by the exchange to the clients. So both trading member and clients see the same quotes.

Again in India it is not possible to requote. But this is quite common in the US and some developed markets. A lot of retail brokers sell the order flow of clients to HFT firms like Citadel and etc.

Thanks @nithin for your explanation and comparison

So apart from the brokerage a broker can earn in India and the DP charges, what else are the typical source of revenue for a broker ? Is it then purely the value added services ? Because basically then broker business is a financial service business and not a funding business in India. Is that the correct interpretation ?

I often see complaints of how thin the margin on broker business is. What is the point of a business with so much downside risk and so little margin then ?

Amount of unused money in trading account is capital for their proprietary trading. it is interest free amount. Most brokers use it.

Wont that be super risky ? As the money can get called anytime. Even if you apply the CRR kind of principal as banks, it still means because of prop trading, the broker can easily lose quite a bit of their liabilities.

There might have been a few brokers who used to earlier. Not possible any more from July 1st 2017 after enhanced supervision rules by SEBI has come into place. Client funds and brokers prop funds are compulsorily kept separate.

Yep, that is a big challenge. If you see all the big brokers, the lending piece is more than 70% of their total revenue, wealth management comes next, and then maybe 10% from retail broking revenue.

When you say lending piece, do you mean the revenue from funding the purchase of F&O on margin ? As far as I know, you cannot lend unless you have NBFC license, is it possible to lend for margin without it ?

By lending I mean - loan against shares, margin funding, housing finance, and etc. Yes, all done through a NBFC arm.

So as of now ZD does not do any right ? So there is a 70% revenue accretion possible ? Thats great !