How Sub Brokers Can Make A Difference

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Sub Brokers belong to the trading profession and are an integral part of the secondary capital markets. Trading has evolved to be a dynamic field; inclusive of talented and capable individuals. Broking and Sub broking is a preferred choice of career for people interested in the stock markets. These professionals take charge of handling investments in shares on behalf of clients. To become Sub broker in India, they have to be registered with SEBI (Securities and Exchange Board of India). As per a recent regulation, they would be accountable to the stock exchanges instead of SEBI.

In the primary market, shares are bought by investors in an IPO (Initial Public Offering) of the company raising money. In the secondary market, shares are purchased and sold by investors through the stock exchanges. It is vital for the shares to be listed on the exchanges to facilitate trading in the secondary markets. Trading on the secondary markets is complicated and requires stock expertise. This is the reason most retail investors designate broking professionals or investment portfolio managers to manage their share investments.

Sub brokers are sub agents of brokers and assist them in making trades for clients. Sub brokers hold a position of trust, just like their principals (brokers/ Trading Members) and work on the ground with investors. Sub brokers have the following important roles in dealing with clients-

  • Effective communication skills: Sub brokers deal with retail investors on a micro basis. They need to have effective communication skills, in order to effect trades to the satisfaction of the clients. Listening is one of the most critical skills a sub broker must possess.

  • Understand investment goals: A sub broker can ensure client satisfaction, by minutely understanding their investment objectives. The executed trades must always align with the investment goals of the investor. Gaps in understanding the motives behind investing (for example- long-term appreciation versus short-term gains) must be avoided by the sub broker.
  • Align goals to executed trades: After getting a thorough insight into the goals and objectives of the investor, the sub broker should align the same with the trading strategy and execute likewise. The stock market is a complex framework with many options for investing in different industries, companies and risk categories. An efficient sub broker should always match the risk appetite of the end investor with the options available before making a trade on the market.
  • Fair trading: Ethical trade is one of the highest requirements from a broker as well as a sub broker. They both hold a position of trust for the investor and the latter relies on their expertise and professional experience in making trading decisions. The sub broker must always abide by the prescribed code of conduct and regulations of a fair practice of trading; without taking benefit from the position of trust.
  • No conflict of interest: Sub brokers work on a salary/ fee/ commission basis on the number of trades executed within a specific time frame. They charge this commission from the Trading Member (broker). By this logic, sub brokers make more commission on more number of trades executed. However, they must execute trades as per the instructions of the investor or broker only and not on their own accord, to prevent conflict of interest.
  • Assisting the broker: The sub broker is responsible for assisting the broker in maintaining up to date records and KYC (Know Your Customer) documents on each client, and execute trading orders on a timely basis based on the broker’s and client’s instructions.
  • Being Technologically savvy: Trading in the secondary markets has advanced in today’s times towards algorithmic trading and real-time buying and selling of shares. It is important for sub brokers to be technologically savvy to execute trades responsibly and on time. Timing is of the essence in the share market. A late or early transaction could cost a client a lot of money.
  • Confidentiality: Sub brokers are entrusted with sensitive information such as the financials of a client, their investment goals, current and future cash flows etc. It is the duty of every broker and sub broker to maintain the utmost confidentiality with client information obtained in the course of business. They must not disclose any of this information, apart from when they have the express permission of the client to do so.

 

Sub brokers can make a lot of difference if they follow the above duties to the best of their ability. The profession is highly respected, and the people in the field are adept at deciphering and gaining insight into the stock markets. With experience, brokers can predict future movements of the market as well.

Responsible execution of trades by maintaining confidentiality and professionalism is of the utmost importance for individuals in the broking field. Conducting ethical and fair trading is also the responsibility of sub brokers. They must conduct trades in accordance with the investment objectives of the clients. This would aid in the responsible trading activity on behalf of clients.