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Wednesday, September 28, 2022

Stock Broker Firm Registration

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Starting a stock broking firm is an attractive business proposition for many. It is also a highly regulate industry and one needs to fulfill certain requirements before they can start their own stock broking firm. In this article, we will discuss the rules, regulations, and procedures to apply for a stock broker firm license in India. 

What is a Stockbroker?

A stockbroker is an individual or firm who conducts trades on behalf of its clients. The primary business of a stockbroker is to buy and sell stocks and other securities through the secondary market on behalf of clients. Nowadays most of the trades are done in the electronic platform except in few exchange segments that still follow the open-outcry method (the traditional way of calling out bids and offers).

Stockbrokers generally make their money through commissions charged for their services. They also provide brokerage services at discounted rates for large trading volumes. Stockbrokers provide advice about which securities should bought or sold based on their knowledge about the market dynamics, economic situation, market trends etc.

Sometimes the term ‘stockbroker’ is use interchangeably with investment advisor or financial adviser or portfolio manager but there are certain differences between them.

What is the Stock Market?

Stock market is a place where shares of companies are bought and sold. Stock market operates as a medium to meet the demand and supply of shares. A stock broker is an individual, firm or company that acts as an agent in facilitating the purchase and sale of a stock exchange between a buyer and seller

Registration of Stock Broker in India

To become a stock broker, it is important to first register with SEBI and then with NSE/BSE or any other exchanges. Various stages involved in becoming a stock broker are:


  • Stage 1: Do I need to take permission from SEBI?


The first step involved in becoming a stock broker is to do registration with SEBI (Securities Exchange Board of India). Since, this plays an important role in regulating the securities market, it becomes necessary to take permission from SEBI before you can start your business. You must have a minimum capital of Rs.25 lakhs for starting your brokerage business.

  • Stage 2: Is there any requirement for qualification for becoming a broker?


To become a stock broker, one must have done graduation or equivalent education from any recognized university. However, if you want to trade on behalf of your clients, then it is not mandatory that you should be qualified.

In India there are two types of securities market participants:

  1. Regulated entities (SEBI registered)
  2. Unregulated entities

Since we are talking about stock brokers in India, we can focus on the regulated entities. For example, a stockbroker is a regulate entity and hence needs to be registered with SEBI for carrying out the business of a stockbroker. Similarly, all other intermediaries like Depository Participant (DP), Registrar and Transfer Agent (RTA), Merchant Banker etc need to be registered with SEBI before they carry out their respective businesses.

Registration process of Stock Broker in India

Meanwhile, This is a step-by-step guide for the registration process of Stock Brokers in India. SEBI has made the stock broker registration process hassle free, and now it is just a matter of a few days to get your stockbroking business started. After that, The process of getting register as a stock broker involves following:

  1. Establishment of new company (Company Incorporation)
  2. Opening of bank account with any scheduled commercial bank
  3. Filing of application to SEBI
  4. Submitting necessary documents to SEBI
  5. Granting of certificate by SEBI

After that, As per Section 12(1B) of the Securities Contracts (Regulation) Act, 1956 read with Regulation 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, no person shall act as a stockbroker without obtaining certificate from the Board i.e., SEBI (Securities and Exchange Board of India).

An applicant shall apply to SEBI in Form A along with the documents mentioned in Form B for the following categories of registration.

  1. Trading Member – National Stock Exchange of India Limited (NSE) / Bombay Stock Exchange Limited (BSE).
  2. Trading Member – Currency Derivative Segment / Futures & Options Segment (F&O) / Wholesale Debt Market Segment (WDM) at NSE.
  3. Depository Participant (DP) – Central Depository Services Limited (CDSL) / National Securities Depository Limited (NSDL).
  4. Trading Member – Commodity Derivatives Segment at MCX/ NCDEX.
  5. Merchant Banker including Category I Merchant Banker.
  6. Portfolio Manager including Discretionary Portfolio Manager.

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