Is Sub-Brokership Without Deposit Possible?

One of the pre-requisites of starting a sub-broking business is the sub-broker deposit. It is an amount demanded by the stockbroker to allow sub-brokers to associate with them. Some stockbrokers are very upfront on the deposit amount they require, and others will give you a range, which can be between Rs 50,000 – Rs 3,00,000.

The sub-broker agreement contains the details regarding the sub-broker deposit. It describes the components, fees, and other essential information on the deposit amount, which the sub-broker has to fulfil.  One of the significant points of the agreement is the payment of the sub-broker deposit to get the rights to do business with the stockbroker.

Sub-broker deposit is a one-time payment that every sub-broker has to pay. But, is sub-brokership without deposit also possible? In some instances, yes. But, before discussing the matter in hand, let’s also take a look at sub-broker deposit and try to gauge its importance.

Sub-broker deposit: Key Highlights

Sub-broker deposit is a one-time fee demanded by the stockbroker to allow sub-brokers to do business with them. It is refundable and returned to the sub-broker at the termination of the agreement. Now, let’s discuss the main characteristics of it.

• It works as a guarantee for the stockbroker to safeguard against any future payment delay or failure
• It is mostly refundable, returned at the end of the contract
• It can be paid in forms of cash or shares
• Sub-broker deposit has a vital role to play in deciding commission structure between the stockbroker and the sub-broker
• Higher the volume of the deposit, higher will be the percentage of commission
• With the deposit, the partner opens a DEMAT account with the stockbroker to carry out official transactions
• Some stockbroker, especially the new ones,  may offer zero deposit fee partnership as their business policy to expand their sub-broker network

Types of sub-brokerships

Sub-broker deposit is often linked to the business model agreed between the stockbroker and sub-broker. When we say sub-broker without deposit a lot depends on the agreed-upon terms of business. To understand it better, let’s take a look at the common sub-broking patterns.

• Master Franchise:Sub-broker can obtain a direct franchise from a broking house. They usually work under the banner of the broking house and need to get office space to run the business.
• Authorised Person:An authorised person is a sub-broker who is registered under the exchange. The AP model also needs an initial deposit.
• Remisier:A remisier works on a commission basis, usually at a lower percentage than a franchise or sub-broker, and his primary role is to bring new business to the broker. They don’t carry our actual transactions.
• Introducer:An introducer will only give prospective clients references to the stockbroker. They receive a commission when the client gets converted.

Other costs of sub-brokership

Sub-broker deposit isn’t the only cost involved. An agent may also have to make initial payments towards SEBI registration and renting office space, hiring employees, and more.

Sub-brokership Without Deposit: Is It Possible?

Yes, under certain circumstances you might strike a deal with zero deposit. Earlier, only introducers could enter a partnership without paying a deposit. But nowadays, many broking houses have lowered their deposit rate or eliminated it altogether to remain in the competition.

Sometimes, a stockbroker might offer attractive zero deposit deals to reputed sub-brokers who can promise a volume of steady business every month.

Now, before you toy the idea of sub-brokership without deposit, consider the long-term benefits. If the stockbroker is a new one, then you might have to find their reputation in the market and long-term business possibilities before committing.

Conclusion

To start a sub-brokership, you need to make an initial payment known as a sub-broker deposit with the broking house. It works as a cushion for the stockbroker against any payment failure. The deposit amount will vary between the stockbrokers, while old and reputed one may charge higher rates than the new ones. But sub-brokership without deposit is also a growing concept, adopted by many stockbrokers in the face of growing competition in the market. Evaluate all your options with time before committing to a proposal.

If you want to explore opportunities as a sub-broker, we can assist you in finding a foothold. Join the advanced network of Angel One sub-brokers and grow in your career.