Sub-brokers are intermediaries in the financial markets who operate under the authorization and supervision of a registered stockbroker or brokerage firm. They assist clients in buying, selling, and trading various financial instruments such as stocks, bonds, commodities, or derivatives. Sub-brokers are often associated with registered stockbrokers and function as their agents, providing clients with services such as order placement, research, and investment advice. While they do not have direct access to the stock exchange, they do facilitate transactions and assist clients in navigating the market's complexity. Sub-brokers are paid commissions or fees for transactions completed on behalf of their clients.
What is a sub-broker?
A sub-broker, also known as an authorised person or associate, is a person or entity who acts as a go-between for clients and a registered stockbroker or brokerage firm. The stockbroker authorises and appoints them to perform trading and investment services on their behalf. Sub-brokers help clients execute trades, manage portfolios, and provide financial advice within the context of stock exchange and regulatory authority laws. They are critical to growing the stockbroker's reach, servicing clients, and maintaining compliance with applicable rules and regulations. Sub-brokers are compensated in the form of commissions or fees for the transactions they facilitate for their clients.
Understanding sub-brokers
Here are some important things to understand about sub-brokers:
● Authorization
A registered stockbroker or brokerage business authorises sub-brokers to operate on their behalf and provide services to clients. They work within the framework set up by the stock market and regulatory bodies.
● Client Services
Sub-brokers offer a variety of services to clients, including executing trades, managing investment portfolios, offering investment advice, and enabling the resolution of trading or investment-related issues or concerns.
● Commissions and Fees
Sub-brokers generate money by charging commissions or fees on transactions that they facilitate for their clients. These costs may differ according to the nature and number of transactions.
● Regulatory Compliance
Sub-brokers must follow the regulations and guidelines established by the stock exchange and regulatory bodies. They must keep correct records, ensure transaction openness, and use ethical practices while interacting with clients.
● Relationship with Main Broker
Sub-brokers are associated with a primary broker or brokerage firm, which provides them with the necessary infrastructure, trading platforms, research, and back-office assistance. The primary broker retains overall responsibility for the sub-brokers actions and guarantees regulatory compliance.
● Market Reach
Sub-brokers play an important role in extending the primary broker's market reach. They serve as a client's local point of contact, offering personalised services and catering to certain market segments or geographic locations.
Difference between Sub-broker and stock-broker
The primary distinction between a sub-broker and a stockbroker in the financial markets is their jobs and level of licence.
|
Aspect |
Sub-broker |
Stock-broker |
|
Authorisation |
Authorised by a registered stockbroker |
Directly registered with regulatory authorities |
|
Market Acess |
Relies on the stockbroker for market access |
Has direct access to the stock exchanges |
|
Client Interaction |
Acts as an intermediary between clients and the stockbroker |
Engages directly with clients, providing a wide range of financial services |
|
Services provided |
Executes trades, provides basic investment advice on behalf of the stockbroker |
Executes trades, portfolio management, investment advice, research, and other financial services |
|
Infrastructure |
Relies on the stockbroker's infrastructure, trading platforms, and back-office support |
Maintains its own infrastructure and support systems |
|
Responsibility |
Operates under the oversight and guidance of the stockbroker |
Holds direct responsibility for client services and regulatory compliance |
|
Market Reach |
Helps expand the market reach of the stockbroker, acts as a local point of contact |
Operates independently to serve a broader client base |
|
Regulator Approval |
Requires authorization from the stockbroker, adheres to regulations |
Requires direct regulatory approval and compliance |
Benefits of being a sub-broker
Being a sub-broker has various benefits. To begin, you can benefit from an established infrastructure and support system supplied by the authorised stockbroker or brokerage firm with which you are affiliated. This saves you the expense and time of establishing your own infrastructure. Second, you have access to research and analytical tools, such as market reports and financial analysis, that can help you make better investment decisions and provide better services to your clients. Furthermore, being linked with a reputed stockbroker improves your market credibility and reputation, leading to improved customer confidence and prospective business prospects.
Financial Knowledge
Being a sub-broker allows you to obtain financial knowledge through hands-on experience, exposure to market trends, access to research, and collaboration with the stockbroker, all of which will help you advance your career in the financial business.
Added Services
Being a sub-broker allows you to deliver additional services to your clients, such as personalised investment advice, quick transaction execution, portfolio management, and successfully answering client inquiries and concerns.
Low Investment Amount
Being a sub-broker allows you to start your business with a cheap initial investment. Aspiring professionals can enter the sector with a relatively minimal initial commitment, making it accessible and inexpensive.
How to become a sub-broker?
You can become a sub-broker by doing the following broad steps:
1. Research and Education
Learn everything there is to know about financial markets, securities, and regulatory systems. Learn about finance, economics, and business through courses, certificates, or a relevant degree programme.
2. Locate a Reputable Registered Stockbroker
Conduct research to find a reputable registered stockbroker or brokerage firm that offers sub-broker partnerships. Consider variables such as their reputation, services given, infrastructure, and support.
3. Please contact the stockbroker
Contact the chosen stockbroker or brokerage firm and indicate your interest in becoming a sub-broker. Inquire about their qualifications, application process, and any unique qualifications they may be looking for.
4. Compliance and documentation
Become acquainted with the compliance obligations imposed by regulatory agencies in your jurisdiction. Prepare any papers requested by the brokerage, such as identity credentials, educational certificates, and financial statements.
5. Application and Agreement
Submit your application to the brokerage, along with all necessary documents and information. If your application is approved, you will sign a sub-broker agreement outlining the terms and circumstances of your relationship with the stockbroker.
6. Licencing and Registration
As a sub-broker, you may be required to get various licences or registrations depending on the regulatory environment in your jurisdiction. Follow the appropriate procedures and meet the regulatory authorities requirements.
7. Training and Onboarding
Once your affiliation as a sub-broker is formed, participate in any stockbroker training or onboarding programmes. This may entail being acquainted with their trading platforms, research tools, compliance procedures, and customer service protocols.
8. Build and Expand Clientele
Use the stockbroker's resources and support to effectively attract and serve clients. To increase your client base, focus on developing relationships, providing personalised services, and showcasing your competence.
Conclusion
Finally, as mediators between clients and registered stockbrokers, sub-brokers play an important role in the financial markets. They provide trading and investment services on behalf of the stockbroker and are authorised and supervised by them. Sub-brokers can add value to clients by using the infrastructure, support, and research supplied by the stockbroker, such as personalised investment advice, quick transaction execution, and portfolio management. The link with a prominent stockbroker improves their credibility and reputation, while revenue-sharing agreements provide a consistent income source. Becoming a sub-broker necessitates knowledge, regulatory compliance, and a cooperation arrangement with a qualified stockbroker.
Frequently Asked Questions
No, sub-brokers do not often trade for themselves. They have the authority to trade on behalf of their clients through the licenced stockbroker with whom they are affiliated. A sub-broker’s primary duty is to conduct trades and provide financial services for their clients, rather than engage in personal trading.
Being a sub-broker can be successful, but it is dependent on elements such as commission structures, client base size and activity level, market conditions, value-added services, cost management, and market competitiveness. Individual circumstances and market dynamics can have a big impact on profitability.
The main role of an Authorized person, or sub-broker, is to act as an intermediary between clients and registered stockbrokers. They facilitate trades, provide investment advice, execute orders, and manage client portfolios on behalf of the stockbroker. They play a crucial role in serving clients and ensuring regulatory compliance.
Qualifications in finance or similar professions, completing regulatory standards, demonstrating financial stability, appropriate experience, and maintaining ethical behaviour are often required to become an Authorised Person or sub-broker.