Should I become a sub-broker? And if yes, how to proceed?

My friend want me to relay this question here and Nithin, will appreciate if you can answer this since you have come through the route of being a sub-broker.

  1. I have a doubt regarding how well can I pull it of as a sub broker or what it takes to be a good sub broker.I am a trader apart from working at a BPO. I have a working knowledge of technical analysis(took a course from BSE Institute Limited) and can somehow identify the stocks to Buy/Sell. But many finance people I know are like CFA/CA level and according to them without having a vast knowledge of finance one should not go it to such fields. I disagree with them because I know that I can pull it off as a sub broker. I want to confirm with you that is it necessary to have a vast knowledge of all finance instruments present under the sky or a good knowledge of technical analysis and the Indian Stock market will do.
  2.  When I started to look for brokers under whom I would be the sub broker, I went to some top brokerage houses and they all told the same thing that I have to keep an amount (mostly INR One Lakh) as deposit and some processing feed and I will be getting the sub brokership.  But my concern is that as these guys like make the process sound like awfully easy and more like get rich quick schemes, but what really goes in selecting the broker under whom I will function.  Apart from the company's past profitability and comparing brokerage rates, is there anything  I need to study.
  3. Though I have somewhat traded on the equities market, but I have no such experience with the commodities, currencies or the derivatives market. I know its important and that is why I am studying a lot in regards to the same. But actual market experience is always different. Do you suggest to wait and have detailed knowledge of the same or shall I continue with my plans.?
  4. I want to ask one thing that where do you see the future of such sub brokers, where people are more comfortable trading from their smart devices or laptops and such great discount brokerage houses like Zerodha are on the field?
  5. Apart from like first approaching friends and relatives and some mouth publicity, are there any alternate or other methods for acquiring more clients.
  6. All these brokerage guys tell that at first I can operate from my home only and with the process of time one can shift to a small office. I want to know like is that OK or one should have a dedicated small office from  the beginning
  7. I have not worked with any brokerage firms before. So will this fact be a like backlog kind of thing when I start with the firm or I will get suited with things with the process of time.
  8. If my ultimate aim is to become a stock broker , then apart from going the sub broker path is there any alternate or other ways.

Firstly, the entity "Sub-brokers" is getting phased out, exchanges don't register sub-brokers anymore. The new term is called "Authorized Person (AP)". Sub-broker used to be a separate registered entity with SEBI, whereas an AP is registered only with the exchange. What this means is that if an AP does any misdeed, unlike with sub-brokers SEBI can hold the main brokerage also responsible. 

So if today, you want to go partner with a broker, you will be called an Authorized person, and not sub-broker. 

Coming back to your questions,

  1. As an AP or sub-broker, marketing skills are more important than CFA/CA and all of that. But yes, a basic understanding of the market is required.
  2. In today’s environment with brokers like us (Zerodha) around, it is very tough to make money by associating with traditional brokers. I guess the important thing to do when you plan to associate with one is to first open an account and see for yourself if you are happy as a client trading with that firm. Only if you are happy as a client, will you be able to introduce more people to it. Apart from brokerage, I guess technology – platforms and reporting tools, integrity in terms of reports, how soon fund withdrawals happen, whether they comply with all exchange regulations, do they credit stocks to demat when it has to, and all the other initiatives that the firms runs should be considered.
  3. Like I said, as an AP, your marketing skills will be what is put to test. So, I don’t think u need to wait until you have learnt currency/commodity.
  4. Unless you are associating yourself with a broker who is working on staying ahead in terms of technology, the future is quite bleak for sub-brokers/AP.
  5. Friends and Family will open accounts, but if my guess is right they most likely won’t be active traders and hence there won’t be any yields on this account. This is probably the single most important question you need to answer before starting off. Traditional methods of using newspaper inserts/pamphlets or setting up stalls etc don’t really work anymore. What will get you new business is directly related to the product that you are trying to pitch and ur marketing skills. So comes back to the ur question 4, which broker are you associating with. At Zerodha we have atleast 4 AP’s who earn more than Rs 3lks per month from us just by running interesting market related websites, capturing and providing qualified leads to our sales team.
  6. It depends on how you are going to acquire clients, if the traditional way, yeah an office would be required. But if you are doing it the online way, u can do it sitting from your house.
  7. It is quite a simple business being an AP. The brokerage firm that you associate with will anyway take care of all the operational headaches, so you will be good to go from day one.
  8. The best way would be through the route of being an AP/Sub-broker as you will understand the nitty gritties of this business. The other route would be by working with a brokerage firm as an employee.

The question you need to answer is, if eventually you want to become a brokerage firm, what will you do that will be your USP (unique selling proposition). In terms of pricing/brokerage charges, there has already been quite a bit of disruption and don’t see how it can go lower from here. So disruption has to be in terms of technology and unless there is a plan on that it doesn’t make sense to be another brokerage firm. 


Zerodha already had referral scheme, so what’s the benefit of becoming an AP?

Referral Scheme is for clients who will get 10% commission on a regular basis, but when you registered as a AP you get upto 60%. Who can become one is written above by Nithin.

HI Nitin, one user is mentioned that one can get upto 60% revenue by registering as an AP. Is it makes sense to register as an AP if your monthly brokerage is around INR 10k?

A partner/sub-broker is supposed to bring more business. We don’t allow the partner to just map his own personal account to get a brokerage pass back.

This person is says he is partner AP sub broker to zerodha
How can i confirm whether this person (see the attachment enclosed herewith) is real genuine authentic AP / partner / sub broker of Zerodha ?

It’s not right to post this Screenshot here.

How do i get the answer ?