How To Build A Sub Broker Business?
- 11th August 2025
- 07:00:00 PM
- 6 min read
Do not have adequate funds for building stockbroker business? Do not worry, you can start a sub-broker franchise (currently known as Authorised Person) and acquire clients to deal in the Indian stock market.
According to the Securities and Exchange Board of India (SEBI), there are approximately 4888 registered stockbrokers in India. This creates competition while starting a stockbroking business.
This blog provides a step-by-step process for starting a sub-broker business, highlighting its advantages and capital requirements.
Who is a Sub-Broker?
Previously known as sub-brokers, Authorised Persons are financial experts who act as middlemen between investors and the stockbroking firm. They carry out stock market transactions on behalf of investors. Unlike full-fledged brokers, sub-brokers do not have direct access to the stock exchanges. However, they can assist investors in placing trades with a brokerage firm.
As sub-brokers were discontinued in 2018 by SEBI, the regulatory status has been changed to Authorised Persons. They are not licensed brokers, as they offer basic market analysis and trading techniques based on their research. They try to match buyers and sellers to settle a price for the securities. In addition, they ask for additional buyers and sellers who want to purchase or sell the same security.
What are the Financial Requirements to Become a Sub-Broker?
Starting a sub-broker business can be a way for you to enter the world of finance. However, the primary concern regarding this is the capital requirement. Just like any startup business, you need to pay the costs listed below:
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Initial Payment
You must make an initial one-time payment to the principal broker, which will cost around INR 50,000 to INR 3 lakh. This cost helps you get the licence from the broker.
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Registration Costs
Then, you must pay the one-time registration cost to get registered with the broker or the exchange, which will be around INR 15,000 to INR 20,000.
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Office Setup Costs
Just like setting up any business, you need to bear the expenses to build an office and set up laptops and other items.
Apart from all these one-time costs, you must consider monthly payments related to staff salary, office rent, internet bills, and others.
What are the Advantages of Becoming a Sub-Broker?
Since the Indian stock market is booming, becoming a sub-broker can be profitable for you. Here are some advantages of building a sub-broker business:
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High Earning Potential
You will get a lucrative opportunity to earn profit by starting a sub-broker franchise. You can also earn commissions and fees to achieve financial success.
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No Direct Market Risk
As a sub-broker, you do not have to invest your capital in the market, but serve as a facilitator to clients. This minimises your direct risks from the stock market.
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Opportunities for Expansion
You can expand your services rather than sticking to only stock trading. You can focus on mutual fund distribution, loan facility, and insurance sales. With these services, you can charge a bit more and earn more profit.
Associating with reputable brokerage firms, you can increase the brand credibility of your sub-broking firm. Since investors are more likely to trust a reputable brand, you can grow your business exponentially.
What is the Process to Start a Sub-Broker Business?
Step 1: Choose a reputable stockbroker by making proper research and comparing different options. You can choose PL Capital Group – Prabhudas Lilladher as a brokerage partner.
Step 2: Meet the eligibility criteria and submit the necessary documents, which are highlighted further.
Step 3: Once you pay the fees and submit the documents, the stockbroker will send the sub-broker application to the stock exchange (NSE or BSE) for approval and pay the processing fee.
Step 4: The stock exchange examines all the documents submitted. In case of any mistakes or incomplete details, the application is returned for rectification. After the verification is done, the exchange proceeds with the approval process.
Step 6: You will get the Authorised Person certification and an individual registration number. Now, officially, you become an Authorised Person.
Eligibility Criteria to Become a Sub-Broker
As per the regulations by the SEBI, you must follow the eligibility criteria below to become a sub-broker:
- Your age must be over 21
- You must have a minimum qualification of 10+2
- Ensure you have basic knowledge of the stock market
- You should have experience in the finance sector
Documents Needed to Become a Sub-broker
- Signed contract with the partnered stockbroker
- Identity proof like Aadhar card, PAN card, or Voter ID
- Address proof like a passport or an electricity bill
- Experience certificate in the field.
- Other documents required by the broker
Drawbacks of Becoming a Sub-Broker
While planning to start a sub-broker business, you must also consider the following potential challenges in this business:
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Regulatory Challenges
As the number of complex financial regulations is increasing, sub-brokers must be updated with the ever-changing compliance. Failure to adhere to these regulations can result in penalties and fines.
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Market Volatility
Sub-brokers often face unforeseen challenges with market fluctuations. This can affect their investment decisions and client portfolios.
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Client Retention
The increased competition among the sub-broker franchises creates challenges in retaining and attracting clients.
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Client Anxieties
Client anxiety is one of the difficulties sub-brokers face, as multiple clients are uncertain about market conditions and profit-making.
Final Thought
Starting a sub-broker business helps you to earn potential returns by not directly serving investors but as an intermediary. You can establish your brand identity and eliminate direct market risks by starting it.
You can also partner with PL Capital, which has more than 80 years of experience in broking services. Due to its variety of service offerings, you can attract more clients with diverse needs.
Frequently Asked Questions
1. How does a broker make a profit?
Brokers make a profit by charging commissions, fees, and earning interest on client funds.
2. Which category of brokers makes the most profit?
Full-service brokers make the most since they offer a comprehensive range of services like trading, investment advisory, and client portfolio management.
3. How do private brokers earn profit?
Private brokers earn profit by charging commissions and fees on each brokerage transaction and account maintenance.
4. Is a real broker profitable?
Yes, a real broker is profitable since they earn huge returns from various sources. The primary sources are charging commissions and sales.
PL Blog
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
