Sub broker Vs Franchise: Understanding The Differences

The popularity of equity investment is steadily growing in India. In the past few years, India’s equity market had outperformed many other asset classes and offered exciting profit opportunities to attract more investors to it. But the Indian stock market is vast, with many players working in a closed ecosystem. It can be challenging to understand, especially if you are a new investor. Sub-broker vs franchise is a significant difference to know when trying to partner with one. Both the models are almost similar in terms of brokerage, eligibility, and revenue sharing, but there are subtle technical differences that you must understand.

Who is a sub-broker? 

In India, individual traders can’t directly trade in the stock exchange. They need to do it through sub-brokers, who are trained financial experts engaged by the broking houses. So, when you are trading, you are probably doing it through sub-brokers.

Sub-brokers are the acting agents of broking houses. They aren’t directly registered with the stock exchange but act as appointed authorities under the broker. Earlier, sub-brokers were required to enrol themselves under SEBI, but as per new rules, it is no longer necessary. Under the new guidelines, sub-brokers only now have to migrate themselves as an authorised person and register with a broking house.

How to become a sub-broker?

It is not at all difficult. All you need to do is to register with a broking house. The government has made it easier for sub-brokers to operate by uplifting registration protocols. If you are 10+2, you can start right away as a sub-broker.

Sub-brokers are paid a commission for each successful trading. As a sub-broker, you have more control over your earning and can increase your income as much as you want.

What is a franchise? 

A large broking house will allow sub-brokers to operate under its brand name and license on fixed commercial terms; this is called the franchise model. Individuals, and small and medium business owners, can apply for a franchise with large broking houses.

A broking house which sells its franchise to others is called sub-broking franchise or franchisor. There are several big players in the market, and Angel One is one of them.

Difference between sub-broker and franchise

Now let’s understand what the primary differences between sub-broker and franchise are.

• To become a sub-broker, earlier you had to register with SEBI. But to become a franchise you must register as AP with any of the brokers.
• Sub-brokers operate under their names. But a franchise gains mileage from the brand name of the broking house.
• A franchise trains its sub-brokers on intricacies of equity trading and assists them to leverage market potential with training and technical support.
• Each franchise has unique sets of requirements to onboard sub-brokers like – having office space and infrastructure, qualification, certification, and more. But for sub-broker, there are no initial requirements as such.
• A sub-broker usually gets a higher percentage of brokerage while dealing with stockbrokers. But a franchise operates under set commercial guidelines which determine its incomes. It depends upon factors like negotiation skills, experience, initial security deposit, and such.
• A franchise enjoys advantages of working under a big brand. On the other hand, a sub-broker needs to start from scratch and work hard to build trust within the clientele.
• As a franchise, you enjoy a lot of support from the company and can grow with it. You will receive assistance in terms of marketing drives and advertisement and grow with the training provided.

If you are keen to explore your opportunities in any of these roles, take a step forward with us.