How To Start a Brokerage Firm In India?
The stock market in India can indeed be lucrative for investors if they invest right with full awareness. But investors aren’t the only stakeholders for whom it can be lucrative. If you have entrepreneurial ambitions, you can start a brokerage firm of your own and pursue your financial goals.
What Is a Brokerage Firm?
A brokerage firm is simply a place where investors and traders go for buying and selling stocks. The firm acts as a middleman between buyers and sellers, and provides a trading platform for everyone. It charges commission on these transactions. Every time an investor buys a stock, a transaction fee is charged.
Earlier, brokerage services were only available at physical offices of the firms. Nowadays, most transactions are carried out online via websites and apps. This has made trading much easier and more efficient, especially for day traders.
You can also start a share broking franchise business (a sub broker franchise) and give your company’s franchise to small and medium sub brokers.
What Is a Sub Broker Franchise?
A broking franchise gives franchise to smaller brokers in order to expand its clientele and make more money through the sub brokers. Sub brokers are like freelancers. They work with a certain degree of autonomy but utilize the brand name and software of the sub broker franchise. The brokerage earned from clients (traders) is shared between the franchise and the sub broker.
Tips For Starting a Share Broking Franchise Business In India
Starting a business involves a lot of strategy, documentation, and patience. Here are some essential steps for starting your own brokerage franchise.
This step involves an equal amount of planning and calculation. Once you make a step-by-step plan of the entire process right from registration to final opening of your business, calculate the approximate cost of each step. Take into account current costs of all aspects as well as expected spikes in costs in the near future. These will include, for example, a base minimum capital deposit paid to a stock exchange as deposit as part of the registration process with the exchange. The amount of these costs depend on your business specifics.
Choose Your Target Market
Your share broking franchise business could be a luxurious venture for ultra-high net worth individuals, or even a small one that guides and assists new investors by also acting as a business financial advisor. A lot of brokerage firms offer advisory services these days. They not only buy and sell shares for their client, but also offer overall financial advice in terms of where to invest, how much to invest, where to save, etc. Your business financial advisor services need to be strategized as per your target market and their level of knowledge about trading.
Determine Your Revenues
As per your target market and your expenses, you will be able to determine how much you can charge your clients. You will need to set charges for both trading and financial advice, or you can even choose to offer free financial advice like a lot of new brokerage firms do in India currently. You can also have a model wherein you provide special financial advisory services for a charge.
Find Out How To Maximize Your Revenue
Find out what makes your brokerage firm different from the scores of others serving the same target audience. Would you specialize in one type of financial advice? You can charge extra for your specialty as a business financial advisor. Think about how long it would take you to increase brokerage charges too.
Get An Office Space
Another essential is to get an office space that is enough for the number of employees you plan to hire in your initial year. Once you upscale, you will also have more funds to move to a bigger space.
Cover All Legal Bases
For a stock brokerage firm, there are some specific registration and legal formalities. The SEBI (Securities and Exchange Board of India) issues a registration certificate. You will also need approval from stock exchanges and clearing corporations. Once you meet SEBI’s ‘Fit and Proper’ criteria, you can apply to stock exchanges via SEBI and obtain a certificate with your unique registration number. You will also need to keep a track of all penalties and rules binding upon your organization and employees.
Name Your Company
Deciding a suitable name for your company is a creative as well as logical process. The name should reflect your company’s vision and suit its long-term brand identity. It should also be short and simple enough for people to remember and identify. Plus, you will have to check some records to make sure that the name won’t fall into legal trouble. These include
State business records
Social media research
Web domain availability
There are risks involved in every business, and it is important to be wary of them. But keeping a positive mindset and an aware sight is what will make all the difference as an entrepreneur. You can also partner with organizations that ease the process for you, like India Infoline This would benefit you as they have existing expertise and experience in the field.