How to Start a Stock Brokerage Firm?

 

In recent times, the popularity of brokerage firms has reached a new high with more and more number of people investing in stock markets. The most interesting thing about these new-age brokers is their strong inclination towards technology-based trading that is immensely popular and engaging. The primary role of a stock brokerage firm is to enable buying and selling of shares, exchange of currencies, and investing in mutual funds. The popularity of stock brokerage business can be understood from the fact that there is an increased search for top stock brokers in India.

Contrary to a majority of businesses, brokerage firms don’t need you to sell a product to find success. Considering that you are adequately equipped, you’ll be able to get income from the commission.

What is a brokerage firm?

A brokerage firm is essentially a business where individuals go to buy and sell stocks. They act as the middleman between buyers and sellers, providing a universal platform where people can trade.

Stock brokerage firms generally get revenue by implying a commission on transactions. For instance, certain transaction fee is levied whenever an investor buys a stock. This enables brokerage firms to continue their operations while making investing convenient.

In earlier times, brokerage firms were only accessible through physical offices. Nowadays, almost all transactions take place digitally through websites and applications. This makes trading more effective, particularly for those that day trade. Even the best stock broker in India follow this model only.

If you’re looking for help on how to start a brokerage firm, refer to the below steps.

1.      Plan your business

A well laid-out plan is essential for success as an entrepreneur. It will help you figure out the specifics of your business and find some unknowns. A few important topics to consider are:

• ·        What are the startup and operating costs?

• ·        Who is your target market?

• ·        How much can you charge clients?

• ·        What will you name your business?

 

2.      Eligibility Criteria

a.      The company should be registered under the companies act 1956 (India) with a minimum paid-up equity capital of Rs 30 lakhs.

b.      Identification of at least two directors as designated directors who would be managing the day to day trading operations.

c.      The minimum age of designated directors should be 21 years (completed).

d.      The academic qualification of each of the designated directors should be at least HSC or equivalent.

e.      Each of the designated directors should have a minimum of 2 years’ experience in an activity related to dealing in securities or as portfolio manager or as investment consultant or as a merchant banker or in financial services or treasury, broker, sub-broker, authorized agent or authorized clerk or authorized representative or remisier or apprentice to a member of a recognized stock exchange, dealer, jobber, market maker, or in any other manner in dealing in securities or clearing and settlement thereof.

f.       Identify the dominant group as per Exchange DPG norms

3.      Related Charges

·        Application processing fees of Rs 10,000/- + taxes.

·        One time admission charges of Rs 5,00,000/- + taxes (for all segments except “only debt”)

·        Annual subscription charges of Rs 1,00,000/- + taxes (per year)

·        Minimum transaction charges of Rs 1,00,000/- + taxes (per year) for Futures & Options and Rs 50,000/- + taxes (per year) for Currency Derivatives segment.

4.      The Process

1. The applicant files an application to NSE for New Membership.

2. NSE sends the application to MRC (Membership Recommendation Committee)

3. MRC forwards application to MSC (Membership Selection Committee)

4. MSC sanctions the application for the New Membership.

5. After approval of MSC for New Membership NSE sends an offer letter of provisional membership to the applicant.

6. NSE also send necessary documents to SEBI for registration.

7. After registration, SEBI issued a Certificate and forward it to NSE.

8. NSE forward SEBI Certificate to applicant.

9. After receiving the SEBI Certificate, an applicant submits enablement documents to NSE and enables the trading system.

Once you have done all the above process you can start a stock brokerage firm in India.