What is the difference between a sub-broker and an Authorized person?

What is the difference between a sub-broker and an Authorized person?

A brokerage company offers two separate partnership business models: sub broker and authorized person. In many ways, these two models are extremely similar; for example, the obligations and responsibilities of the sub-broker and that of an authorized representative are just the same.

However, there are several technological variations across these two versions. Most individuals who desire to be in the brokerage industry are perplexed by these two phrases. And that's just OK!

Sometimes when you're puzzled, you ask queries, which is why this article is made to answer all of your inquiries. This post attempts to address all of the significant distinctions of both a sub-broker and an Authorized Representative from many perspectives, such as their meaning, certification, security payment, revenue allocation ratio, etc., get to know the difference between a sub broker and authorized person.

Authorized person vs. Sub-broker Important distinctions

Take a glance at a few of the significant distinctions between both the Sub-broker versus Authorized Individual partnership models:

Definition

A sub-broker means someone that works alongside a registered professional trader of a major stock market. They established their separate office to build a customer base and operate from it. They receive a part of the trading created by their customers as a payment from the dealer.

A semi-broker is essentially a stockbroker's expansion branch, with it all from a brokerage terminal to analytical papers ready to assist customers. An authorized individual, on the contrary, is approved mostly by a stockbroker and has accessibility to the transaction terminal and the instruments and technologies of a stock market.

They authorize you to exchange assets through one or even more segments. AP could also operate from all the other stockbroker's offices or branches.

Registration

A sub-broker must be registered with the Securities Exchange Board of India (SEBI) and linked with any registered stock exchange trading membership, such as the NSE or BSE. An approved individual is not required to go anywhere throughout the registration procedure. They only need to complete a sub-broker consent form only with the primary broker.

Basically, the stockbroker obtains the certification of AP through a securities exchange, including the NSE as well as BSE, with whom they are affiliated.

Furthermore, APs must register individually if they intend to operate in several sectors, although this is not the case for a semi-broker. Having stated that, SEBI subsequently demanded that semi-brokers be converted to authorized persons or revoked their licenses.

Introductory Deposit

The primary broker requires both sub-broker as well as the authorized individual to pay some safeguard money. A sub-broker typically demands a 50,000 – 3,000,000 initial payment money to begin the company.

In contrast, an authorized individual demands a threshold of $10,000 as an introductory deposit/security payment to begin the operation. That's the approved folks' average value. It might be somewhat high or low.

Revenue Allocation Ratio

A sub-broker is paid a specific proportion of the income earned by their customers (as specified in the contract). Both sides agree upon that proportion at the commencement of the contract. Typically, it varies from 50% to 80% depending on the down payment, expertise, and other factors.

An approved person receives a lower share of the money earned by clients suggested by them. Because they do somewhat less work than the sub-broker, this revenue share percentage might range from 20% to 50%. Sharekhan seems to have the best commission pricing in the market.

Accord

A sub-broker engages in a tri-party arrangement that includes the sub-broker, the stockbroker, and a customer. The customer trades only with a sub-broker; hence the stockbroker could receive brokerage straight from the sub-brokers clients.

An authorized individual, on the contrary, exclusively engages in a contract involving the two sides.

As a result of the preceding explanation, it is evident what the exact distinction between a sub-broker and an Authorized individual is. They are two different people and hopefully, you know how they differ.