Types of Stockbrokers: In India, Types, Salary, Sub Types

A stockbroker is someone who is a licensed representative under the regulation of the stock market. The job of a stockbroker entails the buying and selling of securities on behalf of firms, financial institutions, and investor clients. A stockbroker is also known as the representative or a broker who is registered. Their task is the execution of trade, purchase, or sale of stocks on the national stock exchanges.

Stockbrokers carry out the handling of transactions of both retail and institutional customers. Obtaining buy and sell orders and the execution of the same is the primary job of stockbrokers.

A large number of market participants count on the knowledge and expertise possessed by the stockbrokers pertaining to the dynamics of the market for the purpose of investing in securities. A stockbroker can work either in a brokerage firm or individually. A lot of times brokerage firms and broker-dealers are also called stockbrokers.

Discount brokers have gained widespread popularity because they charge low prices and this in turn makes the market more accessible to laymen. An important difference between a discount broker and a regular stockbroker is that a discount broker has to have an acute knowledge of the market and has to go through a rigorous routine of examinations. In case of discount brokers, however, they do not have to go through such arduous routines.

Table of Content

Types of Stockbrokers
Subtypes of Stockbrokers
Impact of the Internet on the Stock Market
Salary of Stockbrokers
Types of Stockbrokers: FAQs

Types of Stockbrokers

Below we have discussed different types of stockbrokers.

Discount Stockbroker

A discount stockbroker or an online stockbroker is in majority of the band of brokers.
Hiring discount brokers is not much of a hustle as they do not charge much and this is convenient for the laymen in terms of utility of time and place.
The market participants do not need to personally get in touch with the discount brokers and can conduct their investment through the internet.
Investors who have the minimum disposable income can also start to invest in the stock market with the help of discount brokers.
Not all discount brokers have the same level of expertise that the traditional brokers have.
For this reason, discount brokers are a less profitable option for companies and individuals who usually carry out big investments.

Check: Certificate Course in Stock Market

Full-time or traditional stockbrokers

Full-time or traditional stockbrokers provide a lot of products and services to their customers.
These services can include the trading of the securities, advice regarding investments, retirement planning, management of investment portfolio, taxes on capital gains, etc.
The amount they charge can be a bit high but it is justified given the vast range of the services they provide.
Taxes on capital gains are defined as the accumulation of profits from the sale of any capital asset.
Such gains can be accrued either through real estate property or through the sale of investment.
Capital gain tax is the tax that is levied on capital gains. Capital gain taxes are usually levied when there is an asset transferred between owners.
Though all capital gains will be subject to taxation, the tax approach for long term gains have a tendency to differ from that of short term gain.
As it already has been mentioned, traditional brokers go through a strenuous examination routine for bagging the job and for this reason the knowledge they have about the stock market is superior.
They have adequate training to make a bid on your behalf and make sure the portfolio reaches its maximum earning potential and minimize the risks on the same.

Parameters	Traditional Share Broker	Discount Broker
Kind of brokerage and range of fees	Traditional brokers are known to charge a percentage of the value of securities traded as commission. In India, such percentage varies from 0.25% to 0.75%.	Discount brokers usually charge a flat fee against each transaction. Online brokerage will be charged within the range of INR 10-20.
Customer type	Traditional share brokers are apt for investors who require services that are more personalized. Traditional brokers are regular participants of the market who are committed and have a large volume of investments.	Discount brokers are more suited to the individuals who are not regular in their investments as investors. They cater to the people who are new to the market or are not able to afford the high charges that are asked by full time brokers.
Services offered	Some of the primary services offered by full time brokers are brokerage services, management of portfolio, financial advisory, depository services, services pertaining to Mutual Funds, and retirement funding.	Some of the basic services offered by discount brokers are brokerage, Mutual Funds services, and passive management of portfolio.

Check: Top Colleges Offering Certificate Course in Stock Market

Subtypes Of Stockbrokers

Apart from full time and discount stockbrokers, there are also subtypes of stockbrokers who participate in the market. They are discussed below:

Jobbers

These brokers are independent and they conduct trade in securities for their own sake and not on behalf of their investors.
They do not have the license to carry out trade in someone else’s name and they cannot charge commission from others.
Jobbers quote two prices on stocks, one of which is the buy price quote and the other is the sale price quote. The profit margin is the difference between these two prices.

Arbitrageurs

Arbitrageurs are usually known to make purchases of securities from one stock exchange at a lower price and then sell the stock at a higher price in a different stock exchange.

Check: MBA Capital Market

Impact of the Internet on the Stock Market

With the rise of online brokers and platforms for investment, the impact the internet has had on the stock market is intense indeed.

Previously, it was only the well-to-do individuals who could carry transactions of big amounts with full time brokers.
However, once the stock market and share stockbrokers became easily accessible on the internet, it has become very convenient for the customer to make the most of their services.
The volume of transactions has seen a noticeable boost with the advent of the internet. This ease in approaching the stockbrokers has paved the way for startups and small scale businesses for raising capital by carrying out the release of stocks in the market.

The following data shows the requirements in deposit and net worth in order to become a broker in the stock market:

Segment	Total Deposit	Net Worth
Capital and Market	INR 26,50,000	INR 75,00,000
Futures and Options	INR 25,00,000	INR 75,00,000
Currency Derivative Segment	INR 15,00,000	INR 1,00,00,000
Commodity Derivatives	INR 5,00,000	INR 50,00,000

Check: BCom Financial Markets

Salary of Stockbrokers

The salary of stockbrokers varies. A stockbroker gets brokerage commission from their clients.
Whenever their client sells or buys stocks, the stockbroker earns a certain amount of commission.
They can earn a commission of INR 5,000 to INR 1,00,00,000 per month.
It depends on the number of clients the stockbroker has.
The salary increases with the number of clients. The two are directly proportional.

The fees and charges required to become a stockbroker are as follows:

Fee for processing application is INR 10,000 including applicable tax.

Admission fees:

For all segments except “Only Debt”, the fee is INR 50,00,000 including applicable tax.
For the “Only Debt” segment, the fee is INR 1,00,000 including applicable tax.
Capital Market Segment or Annual Subscription Charges: INR 50,000 per annum including applicable tax.
Minimum Transaction Charges or Futures and Options Segment fee is INR 1,00,000 per annum including applicable tax.
Currency Derivatives Segment or Transaction Charges: INR 50,000 per annum including applicable tax.

Check: Stock Trading for Beginners

To conclude, in order to become a stockbroker, an application has to be submitted first to the Membership Services Department. After the submission of the application it will be sent to the Compliance, Recommendation, and Membership Selection committee for approval.

After the approval has been done, a SEBI certificate will be issued and the applicant will be provided the trading system.
The applicant must be a citizen of India and he/she must be of the age of 21 and should have at least completed their higher secondary (10+2) examinations.
Applicants must be certified either in the Compliance Officers (Brokers) Module or in the Securities Market (Basic) Module wherein the membership of the exchange is asked for.

Types of Stockbrokers: FAQs

Ques. What is a discount stockbroker and what type of investor should use them? Who should not use them?

Ans. A discount broker or an online broker is the one who charges a flat fee per order discharged. The trade size does not matter when trade is done with discount stockbrokers. The money they earn is mostly made by routing as many orders to the exchange as they can. Discount brokers are beneficial as they provide access to exchanges, tools, and services. They also help in saving a lot of money.

Ques. What is the best way to know about stock markets and shares?

Ans. For buying stocks, you will need a stockbroker to assist you in buying securities on your behalf. Before you actually get in touch with a stockbroker, however, you need to understand what type of stockbroker you need. They range from cheap order takers to the more expensive brokers who provide an in-depth analysis, recommendations, etc.

Ques. What is a demat account and how can I manage it?

Ans. A demat account allows the investors to hold their shares electronically. It replaces the holding and trading in physical share certificates in the form of paperwork. Trading has been made easy as most transactions are done online nowadays.

Stocks in a demat account remain in dematerialized form where stocks are converted from physical to electronic to ensure increased accessibility. A demat account can also hold bonds, ETFs, mutual funds, gold bonds, and other such assets with a unique ISIN number.

Ques. How do you buy shares in Sensex?

Ans. Atul Dheeraj, completed PGDM from Indian Institute of Management Calcutta in 2019

SENSEX consists of 30 stocks. It is not possible to buy shares in SENSEX directly but it is possible to invest in the companies that are in BSE SENSEX. It can be done by:

Buying their shares directly.
Invest in the companies through Mutual Funds that invest in the shares of SENSEX. Mutual Funds pool the money of investors and invest the same in bonds, stocks, money market instruments and other types of securities.
Exchange Traded Funds or ETFs which are index funds that are traded and listed on exchanges like stocks.

Ques. If you legally make an unexpectedly large profit in the stock market does someone investigate you?

Ans. Trades carried out by the stock market are traceable and there are a lot of methods to trace the money. If you have made money legally, you will be put under no investigation. Unexpectedly large profits are a matter of luck. Authorities might keep an eye on you for a short while to know what kind of an impact your trading activities might have in the future.

Ques. Which is India's best full service broker?

Ans. If you are looking for the best out there then Motilal Oswal is the best option. The platform ensures stability so there is no chance of glitches which often take place in case of discount brokers. The research team backs your advisor so you will always get advice on your trading activities. There are also apps for this service.

Ques. What are the different types of equity market?

Ans. An equity market is a platform that offers companies the capability to build capital through investors. The different types of equity market are:

Primary Market: Through the process of offering the shares of a company to the retail investors with an Initial Public Offering or IPO, the company will offer a portion of their entire equity to the retail investors. Companies usually launch their IPOs in order to build capital. After the IPO is finished, the stocks offered will be listed on the stock exchange and they will be open to be traded by investors.
Secondary Market: Further trading is carried out in the secondary market after the shares have been listed on the stock exchange. The initial investors will be able to square off their position through a stock transaction in the live equity market in the secondary market. The stocks can hold shares and other types of securities such as convertible bonds, corporate bonds, etc.

Investors who are willing to get shares of a company through their IPO but could not buy them can get them on the secondary market. Investing in the secondary market is generally carried out through stockbrokers.

Ques. How do you explain the working of futures and options in the stock market to a layman?

Ans. Both are instruments used in the derivative segments of the market. Futures can be interpreted to be a contract where the buyer agrees to buy an asset at a fixed price on a given day but the delivery will take place at some point in the future.

Options are the financial instruments that are very much like futures. The key distinction is that the buyer has to take the delivery of the asset when the agreed upon date comes. With options, however, the buyer has the ‘right’ but not ‘obligated’ to buy the asset. So the buyer can choose to not take the delivery on the said future date if he/she buys the asset in the open market.

Ques. What is the difference between a broker and an underwriter?

Ans. A broker is a commercial and licensed representative who acts as an agent for financial institutions, an individual or a group of individuals who carry out trade activities on their behalf.

An underwriter, on the other hand, is in charge of paying claims on an insurance policy. Their job is to assess risks for an insurance company. This assessment helps the insurance company to determine premiums the policy holder is to pay based on the risks. Underwriter also acts as an actuary, an insurance statistician who carries out analysis based on statistics. Insurance rates are calculated from those conclusions.

Ques. Where are shares stored, Demat account or Depository?

Ans. Kamal Goenka, Proprietor and Franchise at IIFL Securities LTD Depository is an institution or a kind of organization that holds securities with I in which trading is carried out in debentures, derivatives, commodities, shares and F&O. The intermediaries are in charge of performing their tasks in variety of securities at Depository on the behalf of their clients. These intermediaries are called Depositories or Participants. There are two depositories in India, National Securities Depository Limited (NSDL) and Central Depository Service (India) Limited (CSDL). Every Depository Participant needs to be registered under this Depository before it begins trade in the market.