The Indian stock market has seen tremendous growth over the last few decades. This growth has been fueled in part by the rise of sub brokers, who play a crucial role in expanding retail participation in the stock market.
What is a sub broker?
A sub broker is an individual or firm registered with a stock exchange through a main brokerage firm to buy and sell securities on behalf of clients.
Sub brokers serve as a critical link between full-service brokerage firms and end clients. They help expand the reach of brokerage services to smaller cities and towns across India. This helps bring more investors from varied socioeconomic backgrounds into the stock market.
One of the main advantages of sub brokers is that they have a strong on-ground presence and understanding of local investor needs. Sub brokers are embedded in their communities and leverage their local connections to acquire and service clients. This level of accessibility and familiarity allows them to attract clients who may not directly approach large brokerage houses.
Many small investors in India prefer the personalized services of a local sub broker rather than dealing with a big brokerage firm. Sub brokers provide tailored services like guidance on trading, investment advice, research reports etc. to retail investors in their region. They even assist clients with paperwork and documentation required for trading and demat accounts.
Sub brokers also play an educational role by conducting seminars and campaigns to create awareness about the stock market. Their efforts are indispensable in improving financial literacy and bringing new investors from small cities into the market.
Importantly, sub brokers help expand the equity cult in India. They persuade more people to invest in stocks rather than traditional options like gold or real estate. This brings greater liquidity into equity markets, reducing volatility and promoting stability.
Thus, sub brokers act as important conduits between established brokerage brands and untapped markets in India’s growing economy. Policymakers must support sub brokers through regulatory reforms like lower registration costs. With adequate support, sub brokers can play a transformational role in achieving the goal of inclusive development of India’s capital markets.
The Securities and Exchange Board of India (SEBI) has recognized the value provided by sub brokers. SEBI regulations allow sub brokers to register easily by meeting eligibility criteria like professional certification and minimum net worth. The regulatory body also frequently reviews policies to benefit small sub brokers.
However, more reforms are needed to reduce registration and compliance costs for sub brokers. High costs can prevent capable individuals from becoming sub brokers and offering services in small towns. Regulators should consider lower fee structures and relaxed norms for smaller sub brokers.
Industry associations for sub brokers also have an important role to play. They can collaborate with regulators on reducing regulatory burdens on members. Associations can also provide training and certification programs to improve sub brokers’ professional capabilities.