Types of stock brokers
Last Updated: Sep -16-2019
A stockbroker is a licensed and regulated financial firm that facilitates buying and selling transactions in various financial instruments such as - stocks, derivatives, bonds, and IPOs, for both retail and institutional investors. Basically, all financial market transactions have to be executed through a broker and they charge commission or brokerage charge for their services.
There are two main types of stockbrokers:
- Traditional Brokers
- Discount Brokers
The Discount Brokers usually charge much less, while full-service brokers or the traditional brokers can be very expensive; however, they provide customized service. We advise investors and traders to go through both discount and traditional brokers and get awareness of each of these types of brokers before opening an account.
Here is the brief explanation that can help you in understanding the types of stock brokers.
• Traditional Brokers
Traditional stock brokers or full-service stock brokers offer a wide array of services and products, including financial and retirement planning, investing and tax advice, regular portfolio updates, and margins to purchase investment products on credit which will be subjected to necessary terms and conditions.
Since the traditional brokers offer personalized investment or trading recommendations and services, brokerages charges can be expensive. Take a look at some of the leading Traditional Brokerage firms that let customers invest and trade in stocks, futures, options, currencies, and bonds in the Indian Stock Market.
|A/C Opening Charges||Rs.975||Rs.999||Rs.750||Rs.900||Rs.600|
|Demat AMC Charges||Rs.450||Rs.750||Rs.400||Rs.500||Rs.300|
|Equity Delivery||0.25% - 0.5%||0.3% - 0.5%||0.2% - 0.4%||0.25% - 0.5%||0.1% - 0.3%|
|Equity Intraday||0.025% - 0.05%||0.03% - 0.05%||0.02% - 0.04%||0.025% - 0.05%||0.01% - 0.03%|
|Equity & Currency Futures||0.03% - 0.05%||0.03% - 0.05%||0.02% - 0.04%||0.025% - 0.05%||0.01% - 0.03%|
|Equity & Currency Options||Rs.65-Rs.90 per lot||Rs.50 - Rs 100 lot||Rs.20-Rs.50 per lot||Rs.50 - Rs.100 per lot||Rs.20 - Rs.50 per lot|
|Commodities||NA||NA||0.02% - 0.04%||NA||0.01% - 0.03%|
• Discount Brokers
Discount stock brokers or online stock brokers usually allow clients to trade on their own with little or no interaction with a live broker. Discount brokers could be a better choice for the fee-conscious investors who prefer to do it all by themselves. These brokerages will generally not offer investment advice, although it’s common for a discount broker to offer free research and educational tools to help you make better investment decisions.
Since the discount brokers offer fewer services and/or support, brokerages often come with lower fees than a traditional brokerage firm. Take a look at some of the leading Discount Brokerage firms and their brokerage charges, account opening charges, and annual maintenance charges.
|A/C Opening Charges||Rs.300||Rs.150||Nil||Rs.650||Nil|
|Demat AMC Charges||Rs.300||Rs.150||Rs.400||Rs.400||Rs.400|
|Equity Delivery||Nil||Nil||0.2% or Rs.20 per Executed Order||Rs.10 per Executed Order||Nil|
|Equity Intraday||0.01% or Rs.20 per Executed Order||0.01% or Rs.20 per Executed Order||0.02% or Rs.20 per Executed Order||Rs.10 per Executed Order||0.01% or Rs.20 per Executed Order|
|Equity & Currency Futures||0.01% or Rs.20 per Executed Order||0.01% or Rs.20 per Executed Order||0.02% or Rs.20 per Executed Order||Rs.10 per Executed Order||0.01% or Rs.20 per Executed Order|
|Equity & Currency Options||Rs.20 per Executed Order||Rs.20 per Executed Order||Rs.20 per Executed Order||Rs.10 per Executed Order||0.01% or Rs.20 per Executed Order|
|Commodities||0.01% or Rs.20 per Executed Order||0.01% or Rs.20 per Executed Order||0.02% or Rs.20 per Executed Order||Rs.10 per Executed Order||0.01% or Rs.20 per Executed Order|
In conclusion, let us summarize all the points:
|Discount Broker||Full-Service Broker|
|Brokerage||Charge a flat fee on each executed order irrespective of the trade value||Generally, charge a percentage of the trade value. Consider low brokerage fee for high volume trades|
|Brokerage charges||Rs 10 – Rs 20 per order||0.25% to 0.75%|
|Services||Very rarely, may have broking services with few brokers offering Mutual Funds services||Broking services, research, wealth management, retirement planning, depository services and more|
|Suitable for||Traders who prefer online trading||Frequent traders who need advice and assistance related to all kinds of trading and investment services|
|Physical Presence||Strong PAN India presence of most of the brokers|
|Customer Service||Online services, email, chat||Has RM assistance, branch servicing, email, chat, doorstep servicing, and more|
|Examples||Zerodha, Upstox, Trade Smart Online, SAS Online, Tradejini and more…||ICICI Direct, Kotak Securities, Sharekhan, HDFC Securities, Axis Direct, Edelweiss, and more…|