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Since April , around 30, sub-brokers have been forced out of business because of dwindling interest from retail investors and tighter regulations.

N ikant Nitin Nagaonkar, 30, shut his Alibaug-based sub-broking business, Nagaonkar Online, recently. He is one of the 15, sub-brokers who have gone out of business since April, according to the Securities and Exchange Board of India Sebi —a record for any single fiscal year.

The closures reflect a rising trend. Since April , around 30, sub-brokers have been forced out of business because of dwindling interest from retail investors, falling volumes in the cash market and tighter regulations. A sub-broker is not a member of a stock exchange, but acts on behalf of a member or a broker, typically as an agent assisting investors in buying and selling securities. Nagaonkar looks after his family businesses to earn a living now.

He manages a grocery shop, a stationary store with a photocopy machine, a telephone booth, a small milk shop and some smaller businesses in Alibaug, which earn him close to Rs.

Unfortunately, markets got only worse day-by-day and share market investors stopped coming in as they were sitting on losses. Some brokers in the cash segment too have gone out of business. The number of brokers in the cash segment fell by to 9, between April and December, the highest in three fiscal years.

In the same period, the number of sub-brokers dropped to 55, from 70, Sub-brokers blame the decline on a drop in cash market trading and a regulatory regime that has increased their operating costs.

According to Mint research, the average annual value of cash market trades has come down from Rs.

Overall trades have risen in the same period. Cash trades as a proportion of total trades on the BSE and the National Stock Exchange accounted for around 3. Income from cash market trades, which are essentially trades by retail investors, is the mainstay of sub-brokers. And retail investors have stayed away from the market in the face of an economic downturn although key indices have returned to near-record levels.

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From a range of 0. Several have moved on to other businesses, said Sudip Bandyopadhyay, managing director and chief executive officer of Destimoney Securities Pvt. Several have given up and shifted to real estate broking where the income is much higher.

According to Bandyopadhyay, the increased cost of compliance has meant that the economics of the business has changed. Revenue of at least Rs.

15, sub-brokers have gone out of business since April Sebi - Livemint

Over the past two years, Sebi has tightened compliance norms for brokers and sub-brokers, apart from capping transaction charges a brokerage can levy. This increased the cost of brokerage operations substantially. Sebi introduced so-called base minimum capital BMC , which is a deposit made by a member of the exchange against risks other than market risks.

The norms were brought into force in fiscal A broker could not take any exposure for trades against his BMC deposit. Sebi increased the range of the deposit to between Rs. The new rules require brokers and trading members to deposit Rs. Typically, sub-brokers join under registered full-fledged brokers after paying a certain deposit to the latter, apart from a certain Sebi fee and exchange fees.

The sub-brokers act like franchisees and most of their operational costs are borne by the brokers under whom they work. While this led the brokers to increase the deposit charges from sub-brokers, an insipid cash market spoilt the prospects of earning income to compensate for the deposits, forcing sub-brokers to shut shop.

Meanwhile, other market intermediaries are tweaking their strategies to adapt to the changing market realities. To be sure, the number of investor accounts at National Securities Depository Ltd has gone up from Home Companies Industry Politics Money Opinion Lounge Multimedia Science Education Sports More Technology Consumer Specials Mint on Sunday.

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