How to Start a Brokerage Firm in India

Starting a brokerage firm in India is an exciting venture into the thriving financial industryHowever,  carefully planning this venture would be essential,  Are you an experienced finance professional, an enthusiastic entrepreneur looking to make your mark, or perhaps both? Well, this article is the source of information you will need to understand and take actionable steps toward navigating the complexities in the brokerage industry. Let’s get started!

What is a Brokerage Firm?

A Brokerage firm is a platform where investors buy and sell stocks, acting as a link between buyers and sellers. It charges a small commission on each transaction. Today, you can also start a share broking franchise, known as a sub-broker franchise, to help Brokerage firms find new clients and earn a share of the commission.

Earlier, investors had to visit stock exchanges physically to trade. But after SEBI’s push for digital trading in 1993, Demat accounts became mandatory, leading to the rise of online Brokerage firms in India.

Types of Brokerage Firms

Wondering how to open a Brokerage firm? You need to figure out the kind of Brokerage firm that you want to set up. The different types are as follows:

• Full-Service Brokers:

  These stockbrokers provide comprehensive services to clients, including providing advisory assistance. They can help an investor gain insight into investment opportunities. Typically, their brokerage fees are based on the total amount of executed trades. These are generally well-established market players, with a range of network offices/branches across the country.

• Discount Brokers:

  They charge comparatively lower fees as compared to full-service brokers. Their services don’t include advisory assistance or market research to help clients zero in on a suitable investment opportunity. Usually, they charge a flat fee for undertaking stock market transactions.

• Brokers Charging Flat Brokerage:

  These types of stockbrokers have gained popularity because of the increasing use of digital technology in trading. They are a mix of both full-service and discount stockbrokers, charging a flat rate brokerage fee.

Steps to Start an Authorised Partner Firm

The steps to set up an authorised partner firm are as follows:

Step 1: Calculate Costs

After making a plan for the procedure, from business registration to the official opening, you figure out the approximate cost of each step. Both present cost and future requirements should be considered. These will comprise, for example, a base minimum capital deposit made to a stock exchange as an upfront payment for the registration process. The total cost will vary with your company’s unique circumstances.

Step 2: Decide on Your Market

The steps in setting up brokerage firms in India vary from one type of investor to another. Your share broking franchise company could be an expensive venture aimed at only the super-rich. On the other hand, it may act as a financial advisor for small companies and help and counsel prospective investors. Many firms now offer consulting services as part of their services as brokerage firms. They help purchase and sell shares. They are capable of general financial consulting, like where to invest, how much, and where to save.

Step 3: Establish Your Revenue Streams

Determining revenues is the other step in opening your brokerage. You determine how much you may charge your customers based on the market you want and your expenses. You must fix fees for both trading and advisory services. You may give free financial advice like many new brokerage businesses do in India. Depending on a different business model, you may charge clients for specific financial advisory services.

Step 4: Identify Your USP

Learn what sets your brokerage company apart from the many others competing in the same target market. Would you focus on a niche area of financial guidance? Check what works best for you and the client you are looking at serving.

Step 5: Obtain SEBI Registration

The applicant for registration will have to meet the norms set by the SEBI. The SEBI offers a standard registration certificate after setting a standard for issuing brokerage services. Both the clearing corporation and the stock exchange need to give them no objection. A registration application should be given through the concerned stock market that regulates it in the prescribed format. After the board is satisfied with the application form and additional paperwork, it will be granted a registration number and a certificate following proper work.

Step 6: Pay Required Fees

The broker will have to pay a membership fee. This is usually charged by the exchange where they intend to attend after approval from SEBI.

Step 7: Minimum Base Capital Deposit

After membership, the applicant has to pay a base minimum capital deposit as security with the stock market. The deposit for those stock brokerage firms trading for their account by a non-algorithm method is ₹10,00,000. For those brokerage firms trading on behalf of their clients by a non-algorithm method, the deposit is ₹15,00,000. And for those doing both, the deposit is ₹25,00,000. The minimum requirement for a stock broker by an algorithmic trader will be ₹50,00,000. The brokerage deposit for non-national presence brokers will be 40%.

Who Can Set Up a Brokerage Firm? 

Those who wish to set up their brokerage firms will have to fulfil the following criteria:

• Completing 10+2 education
• Minimum age of 21 years
• A bachelor’s degree (preferably in a finance-related background)
• Training in one of the specialised sectors of finance, business administration, or economics is preferable before becoming a licensed stockbroker. One can also go for a postgraduate degree in business administration (MBA in Financial Markets), economics, or commerce to become better equipped to run their brokerage firms.

Documents Required for Setting up a Brokerage Firm

• Incorporation Proof: Certificate of Incorporation, Memorandum and Articles of Association for a company, or partnership/LLP deed for non‑corporate entities.
• Statutory IDs: PAN card of the firm, GST registration copy, and TAN if applicable.
• Net‑Worth Evidence: Net‑worth certificate from a Chartered Accountant plus audited financial statements and bank statements showing paid‑up capital.
• Promoter KYC: PAN, Aadhaar, address proof, DIN and passport‑size photographs of all directors or partners, along with a “Fit and Proper” declaration.
• Business Plan: Detailed note on business model, revenue streams, technology set‑up, risk‑management systems and compliance framework.
• Infrastructure Proof: Lease deed or ownership papers for office premises, internet connectivity details, and a list of hardware and trading software.
• Regulatory Certifications: NISM certificates for authorised persons and employees engaged in dealing or compliance.
• Agreements and Tie‑ups: Copies of proposed agreements with stock exchanges, depository participants, clearing members and back‑office vendors.
• Internal Policies: Written procedures for anti‑money laundering, client onboarding, record‑keeping and grievance redressal.
• Application Forms and Fees: SEBI stock‑broker application form, stock‑exchange membership form and payment proofs for all prescribed fees.

Conclusion

Now that you know how to start a Brokerage firm in India, you’re ready to begin your journey in the stock market. While risks exist in any business, staying alert and positive can make a big difference.

Partnering with experienced firms like IIFL Capital Services Limited can ease the process. IIFL offers one of the top sub-broker franchise models, along with strong brand support, smart advisory tools, advanced trading platforms, and quality research reports.