Hello @nithin
I have recently commenced my role as a dealer with XYZ broker. I have provided them with my NISM certificate, and in return, they have assigned me a prop ID as a dealer, with a compensation structure consisting of a salary and quarterly profit sharing.
I would like to confirm the validity of this arrangement and seek your advice on whether it is advisable to receive the profit-sharing component in my current account labeled as a professional fee.
Thank you for your guidance.
Have you been asked to deposit funds with the broker?
If you are keeping a deposit with the broker and he is giving you access to the terminal and using this way to circumvent the intraday leverage restrictions, it is a clear violation of SEBI regulations. SEBI could act anytime on the broker, and since you are giving a deposit to the broker, your funds are also potentially at risk. Even if SEBI doesn’t act, any deposit with the broker which is not through the trading account but some other informal arrangement exposes you to a large broker default risk. The broker could anytime deny giving you back the money.
Okay @nithin
Got it. Then there is no issue if I am working as a dealer without keeping a deposit?
Thank you
From what i have heard, this arrangement seems to be readily available from many brokers. Including a listed company called shareindia.
And the terms seem to be very unfavorable - completely distorting risk reward for traders + general expectation of steady profits.
Without a deposit, there is nothing for you to lose, right? But the broker is most likely going to be in trouble for doing this. It is unlikely that they will let you trade without a deposit though as that will be a large risk for the broker.
Adding to my earlier point, this new model is probably the reason why prop trading as a % of overall trading has gone up in recent times. This going up also could trigger a regulatory action. There was a recent circular by the exchanges that said that dealer terminals can only run within broker premises and by employees/APs of brokers.
