As a new entrant in the world of online investing, choosing between brokers can be a challenging task. More so, if you come across the term, sub-brokers, it could confound you even further. It can help to know the difference between the two.
A broker is different from a sub-broker in many ways. Brokers and sub-brokers are two separate entities and stakeholders within the stockbroking space in the country, with varying levels of responsibilities. Here we look into the difference between a broker and a Sub Broker.
A sub-broker is a type of agent that acts between a large broking service such as Kotak Securities and investors or clients. These are usually business associates of brokers. Their duty is to provide services of the broker that they are associated with, to the clients of the broker. They generally offer individual interaction with clients, and for this service, the sub-broker receives a portion of brokerage as commission. Sub brokers are constantly on the lookout to acquire clients so as to generate brokerage and build a large client base.
A broker or a stockbroker, on the other hand, is a registered trading member of a stock exchange, such as the NSE and BSE. Among brokers, there are two different types of stockbroking services — full-service brokers such as Kotak Securities and discount brokers. Brokers are authorised to trade on the stock market on behalf of a trader or investor. A broking company must be registered with the Securities And Exchange Board Of India (SEBI) and the stock exchange. Brokers typically offer their services in exchange for brokerage fees.
Although there are some similarities between a broker at a sub-broker, there are distinct differences between the two. These include:
- Trading – A brokerage firm trades in stocks and directly trades in the stock market. On the other hand, a sub-broker trades only through the broker and passes the investor’s orders of buying or selling to the broker, who in turn conduct the execution.
- Market research and analysis: Full-service broking companies invest a significant amount into research and resources for the benefit of their investors. As reputed brokerage firms are well established, their research and in-depth expertise is an asset to the organisation, and these are shared with sub-brokers as well as clients. Large brokers and sub-brokers serve their clients better by conducting regular interactive sessions such as workshops and orientation programs.
- Commission and fees: brokers earn fees based on the services they render. On the other hand, a sub-broker earns a commission from the broker, which is a percentage of the brokerage fee.
The goal of a broker and sub-broker is to assist investors in investing in the stock market. The primary distinction between the two is in their working capacities. A sub-broker is a crucial link between a large broking firm and the investor, while the broker plays a critical role in executing the buying or selling order of the investor. Hence, both entities have a vital role to play in the world of stock trading.