Best Stock Brokers In India – Its Types and What do Share Market Brokers Do
The stock market has recently caught the fancy of many investors, with liquidity being high in the markets globally post the Covid-led pandemic. In India, there are seven stock markets led by NSE and BSE, where buying and selling of securities takes place. However, it is not possible to directly buy and sell at the exchanges. The stock market regulator, the Securities Exchange Board of India (SEBI), mandates that buying and selling of the shares take place only through authorised stock brokers.
Who is a Stock Broker?
A stock broker works as the intermediary who facilitates securities trading on behalf of the clients. A stock broker may be a qualified individual authorized by SEBI to transact or maybe a firm that helps set up Demat accounts and provides securities transaction facilities. In some ways, they may be called investment advisors.
Many stock brokers work in a brokerage firm and handle transactions. Brokerage firms and broker-dealer companies are also generally referred to as stock brokers.
What do Stock Brokers Do?
A stock broker is responsible for buying and selling shares/stocks. The brokers require access to major exchanges like BSE and NSE to buy and sell stocks. To trade, the brokers also need to be members of the stock exchanges. They can also belong to the member firm. Individuals who work for these firms are licensed as brokers.
A stockbroker buys stocks from the stock exchanges of the company the client wants to invest in, in quantities as ordered by the client. The shares in the dematerialized form are credited to the broker account, from where it is then transferred to the client’s trading account. SEBI prohibits direct dealing of investors with the exchanges and mandates that everyone goes through authorized brokers.
History of Stock Brokerage
A stock broker is an institutionalized profession that dates back to the 2nd century in Rome. However, the post was officially not in existence until the European Renaissance took place. It was a small-scale practice back then.
The stocks of companies were not traded until 1602. By the law of private property, the rights were further indoctrinated; hence, the profession of stock brokers flourished. By the end of the 17 century, the London Stock Exchange was established, and in 1792 the New York Stock Exchange (NYSE) was created. The first stock exchange in Asia and India came into existence in 1875. It was called the Bombay Stock Exchange (BSE)
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There are different types of stock brokers in the stock exchange market. They are:
1. Traditional Brokers
Traditional brokers often provide a full range of products and services like investment advice, research reports, retirement planning, trading, etc. These brokers may charge a higher commission for the services they provide.
2. Discount Brokers
Discount brokers or online brokers are inexpensive and offer convenience to investors. The investors do not have to meet these brokers personally as the investment is carried out via the internet.
3. Jobbers
Jobbers are independent brokers who mainly trade in securities. However, they are not licensed to trade in someone else’s name.
4. Arbitrageurs
These stock brokers purchase securities at one price from a stock exchange and sell them at another price in another stock exchange. In this way, they earn profits from the differential.
These four types of brokers in the share market help others in investing while earning commissions for themselves.
The rise of the internet has benefited many people over a certain period. Let us see the impact of the internet on the Stock Market.
How has the Internet Impacted the Stock Market?
The stock market was a place for manual trades earlier. Stock brokers would line up at the trading counters and use hand gestures (after a period of frantic shouting to make oneself heard) to indicate the buy and sell of securities. There was much margin for error, apart from the fact that prices could change by then, either resulting in a loss for the client or the client being simply unable to make the trade at the time.
The percolation of the internet revolutionized the stock trading systems. It put real-time data in the hands of brokers, and they were able to provide access to their clients. This enables a faster trading mechanism and drastically reduces the margin of error. This has been the most significant impact of the internet on stock markets.
Best Stock Brokers in India
There are a lot of stock brokers in India. But there are some top-listed share market brokers. Have a look at them!
- Zerodha – Zerodha offers flat fee discount brokerage. They provide numerous services like investing in equity, currency, IPO, etc.
- Upstox – It is the first low-cost brokerage firm that provides trading at low rates. All services are provided online.
- Angel Broking – Angel broking provides access to trade in all segments at a fixed rate, i.e., Rs 20/-. They also offer discount brokerage rates to the consumers.
- ICICI Direct – It is the largest retail stock broker that provides investment services and online trading. The company offers services in mutual funds, IPO, etc.
- HDFC Securities – HDFC offers both offline and online investment/trading services. It provides numerous services for moving the shares to the Demat account for executing transactions.
How to Choose a Stock Broker?
Now that you know the different types of stock brokers, you can choose one that fits your investment strategy. Here are a few pointers you can keep in mind to choose the best broker for trading:
- Brokerage fees: Full-time stock brokers offer personalised services but charge high commissions for their expertise. On the other hand, discount brokers offer digital trading platforms with a low brokerage fee. Investors can go for a traditional or a discount broker based on their investment strategy.
- Advisory facilities: Unlike traditional brokers, discount brokerage platforms do not offer trading tips to investors. If you are someone who prefers to take independent decisions when it comes to investing, you can choose discount brokers. If you require expert advice, full-time brokers are your go-to option.
- Market awareness: New investors might not have sufficient knowledge, to begin with. One must try to choose a broker that actively offers knowledge about the changes in the financial markets.
- Trading platforms: An efficient trading platform a crucial factor when choosing an online stock broker. The trading platform should offer an easy-to-understand interface that engages in easy and fast transactions.
- Background and reputation: Renowned stock brokers who have been trading for years are trusted by millions of active investors. It is crucial to research the background of a brokerage firm before availing their services.
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Final Word
A Stock Broker facilitates and provides a platform for investors to trade in equity and related securities. SEBI prohibits investors from dealing directly with the exchanges and mandates that investors engage only through stock brokers. They, therefore, play a very important role in the financial markets. Stock brokers earn through commissions and may charge on a per trade basis or based on the quantum of assets bought or sold. One may want to assess the rates and service records of the stock brokers before engaging them.
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FAQs
Ans: The stock brokers buy and sell securities through a stock exchange in return for a commission. Their ultimate goal is to make profits with the help of stock market variations.
Ans: There are four types of stock brokers, i.e., traditional brokers, jobbers, arbitrageurs, and discount brokers.
Ans: An authorized stock broker with a clean record and one who has generated decent profits for their clients may be construed as a good broker. That said, past performance is not a reflection of what is to come. Investors need to verify a lot more, including proactiveness of the brokers, the facilities they provide, the suitability of the fees and charges, etc., before they decide on the best stock broker.
Ans: The salary of the stock broker is dependent on a percentage-based model. By buying and selling shares, they earn profits as well as commissions.
Ans: Yes, stock brokers can become very successful over a period of time. By buying and selling shares, they can earn hefty profits and commissions. But the journey is also fraught with risks. Stock brokers need to go through rigorous training and certifications to become authorized and affiliated with SEBI.
Ans: The easiest way beginners can buy stocks is through an online stock broking platform. After opening a trading account on your preferred brokerage platform, your broker will be able to buy and sell shares on the stock exchanges on your behalf.
Ans: Yes, it is legal for an investor to have multiple stock trading accounts. However, each of the accounts should be with a different broker.
Ans: Some of the primary services provided by online stock brokers are passive portfolio management, brokerage services, mutual fund services, trading tips, portfolio analytics and customer support.
Ans: Yes, a trading account is quite similar to a brokerage account. It allows you to buy and sell securities, that too on the same day. It is a type of brokerage account that is ideal for day-to-day traders who engage in high trading activity.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
