As we know that to start a sub-broking business, a stockbroker demands an initial investment deposit by the sub-broker as per the sub-broker agreement between the two. Every stockbroker requires some amount of deposit from the sub-broker with whom they start the partnership business.
This initial deposit is a type of security taken by the stockbroker.
In this article, we will try to cover things like the basics of the security deposit, the features of the security deposit, benefits of starting a sub-brokership with the security deposit and finally, examples of sub-broker without deposit.
Sub-broker without Deposit Review
An initial investment or the security deposit is one of the important things mentioned in the agreement of sub-brokership. The stockbroker, generally, mentions it clear enough about what is their requirement of the security deposit for a particular business model.
Some stockbroker mentions the minimum amount of security deposit while others mention a range of security deposit.
The normal range of security deposit is ₹50,000 – ₹3,00,000. It can be a bit low or high of this range but, this is a standard range. One can deposit any amount between this range.
With this security deposit, a sub-broker gets the right to start a partnership business with the stockbroker under the latter’s brand name. They also get the right to use the tools and technology, trading platform, research reports of the broker.
Security deposit: Key characteristics
Here are some important characteristics of the security deposit and the formalities related to this:
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- The security deposit is taken by the stockbrokers as a security in case of failure of any future payment.
- In terms of the agreement, it is mentioned by almost all the stockbrokers that the security deposit is refundable and will be refunded to you at the time of the end of the contract.
- The security deposit can be accepted in both the forms either in the form of cash or shares.
- The amount of security deposit decides the revenue sharing percentage of the sub-broker up to some extent. If the security deposit will be on the higher side, the percentage of revenue will also be high.
- By depositing the security money with the stockbroker, a partner can open a trading or Demat account with the broker for official transactions.
- Generally, it is seen that the new entrants in the broking space, offers ZERO investment/sub-broker without deposit to the partners to expand their business.[/su_list]
Sub-broker without deposit: Is It Possible?
Now, coming to the million-dollar question, can anyone be a sub-broker without deposit?
The answer is yes, there are some stockbrokers who give an opportunity to those who want to start their own business without an initial investment/security deposit.
Today, there is tough competition in the broking field. The stockbrokers are adopting different strategies to attract more business partners for business expansion.
The very first step is lowering or removing the initial deposit criteria to start a partnership business. Some stockbrokers lower the requirement of initial deposit while others remove. It depends on the strategic need of a stockbroker.
There are some other factors also that are considered for the security deposit such as the reputation and the client base of the sub-broker. If a partner can guarantee some minimum trade per month then there is a high chance that your initial deposit will be waived off or at least lowered to a good extent.
Now, it is your turn to think deeply that why some brokers are demanding security deposit while others are not. If you are the one, who want to start a partnership business in the broking field without a security deposit, then you should think about your long term benefit first.
Because in most of the cases, it is seen that the brokers who have limited brand equity and network, they try to offer you partnership without any cost. But, their long-term benefits are relatively much limited.
Initial investment/Security deposit – Why?
One should understand what benefit they will get if they start a sub-broking business with a security deposit. Why most of the stockbroking companies demand a security deposit?
The answer is here:
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- If you start a sub-broking business with a security deposit, you can bargain for the higher revenue sharing ratio. You know that higher sharing ratio depends on the amount of security deposit up to some extent.
- In case, while running your business, if you will not be able to meet some urgent/necessary cost or charge demanded by the stockbroker, the money will be deducted from your security deposit.[/su_list]
Sub-broker without deposit: Examples
Here is a quick look at some of the stockbrokers that provide partnership services without deposit:
The stockbroker ‘Cashbox’ is a new brand in the market so, fewer people know this company. The broker gives you an opportunity to start a partnership business with them without any cost or zero initial deposit.
They are following Zero security deposit model to promote their brand as well as to attract sub-brokers with the idea of low-cost sub-brokership. They also want to grow with the help of your referrals which will ultimately minimize their expenditure on marketing and advertising.
The revenue sharing ratio offered by the broker is 80:20. With zero investment, this revenue sharing ratio is far better in the comparison of other stockbrokers in the industry.
Zerodha, a Bangalore based company is a relatively older name in the broking space. It offers the facility of sub-broker without deposit. Since it is not so old as some of the mainstream full-service stockbrokers such as Angel Broking or Motilal Oswal in the broking market, it wants to attract more and more business partners to grow their business.
Zerodha offers two business models Remisier and client to client model to get associated with them. And for both the models, they are not demanding any initial investment/security deposit from the partners to start the business. With zero investment, they offer an attractive share of revenue to the partners.
Edelweiss offers zero investment/security deposit on its one of three partnership business model known as Edelweiss Elliance. This model of the broker is the same as the Remisier model.
So, all three brokers are the option for you if you are thinking to start a business in broking space with zero investment/security deposit.
As there are many options available to those who want to make their career in the broking field through sub-broker business.
Because there is a high competition among the stockbroker, it is seen that in order to make their client base strong with a wide presence, they try to attract them through zero initial investment offer or sub-broker without deposit.
In case you are looking to become a sub-broker or any other partner in the stock market industry, let us assist you in getting started:
More on Sub-brokership
If you wish to learn more about sub-brokership, here are a few references for you: