Comparison of Full Service Brokers and Discount Brokers in India Published on Thursday, December 11, 2014 by Mukesh Kothari, Chittorgarh. Forex trading in mumbai india can help you find the right broker for your trading needs. I follow the brokerage industry very closely.
Recently I came across a radical change in the India brokerage industry. This has drastically changed the trading habits of many traders and has brought down the brokerage cost significantly. In this article I will explain about how new breeds of broker are taking the traditional brokers head on and how the broking industry in India is heading for a change. Types of ‘Retail Brokers’ in Indian Stock Market As stock market investors we all use brokers on a regular basis. These brokers are registered members of the stock exchange and regulated by SEBI.
They also allow investing in Forex, Mutual Funds, IPOs, FDs, Bonds and Insurance. In some cases full-service brokers also have in-house banking and demat account services. India has over 10,000 traditional retail brokers. They are ‘advisors’ for the client and at the same time salesmen for the financial products. Discount brokers offer low brokerage, high speed and the state-of-the-art execution platform for trading in stocks, commodities and currency derivatives. They offer ‘no-frills’ brokerage service for ‘do-it-yourself’ traders who understand the market well. Discount brokers are new breed of brokers offering technologically advanced service at extremely cheap online brokerage services.
This comparison shows that discount brokers charges much less brokerage. Most discount brokers also do not charge minimum brokerage. They are online brokers having couple of offices in metro cities. Around 500 brokers closed their shops in last 1 year. Many others have downscaled including largest ‘India Infoline’. Most discount brokers started business after year 2010.
They offer research reports, personal recommendations, funding, extended margins and many other add-on services. They are online brokers focused mainly on trading. They don’t offer research, funding and other add-on services. Many offers 3-in-1 account for seamless transactions. This includes trading account, demat and bank account.
The brokerage can also be negotiated in most cases. Most full-service brokers are not transparent in terms of charges. Some broker offers prepaid plans with complex terms and conditions. Helps trading in very small quantity or in penny stocks.
Very expensive as they charge minimum brokerage. Very cheap as their brokerage is like ‘0. Trade whichever is lower’ for equity intraday with no minimum brokerage. Most of them charges extra to retail investors for using trading terminal. Many of them offer funding for trading. No funding is available through broker.
They offer higher margin based on your personal relationship with the broker. The margin offered is standard margin which is same for all the customers. They are active in all areas of security business including investing in Stocks, Commodities, Forex, Mutual Funds, IPOs, FDs, Bonds and Insurances. Stocks, commodities and currency derivatives trading at NSE, BSE and MCX. People, who need help from broker giving them stock tips, manage their portfolio, seeking diversification and the right asset allocation.
They are mainly for ‘do-it-yourself’ traders. They serve traders seeking low-cost execution. As the brokerage market is overcrowded the traditional broker are focusing more on investor advisory as a business model. The business model is built on having an effective system and quality service in order to put through the most volume. By now you may have got a good idea of how discount brokers are different from full-service brokers. Let’s talk about the myths and doubts most traders have about discount brokers. Here I will try to clarify few doubts many traders have about discount brokers.