Trading members, commonly referred to as brokers, play a crucial role in the stock market by conducting various transactions on behalf of their clients, such as buying and selling stocks. They charge a commission for their services.

Additionally, brokers offer a range of other services, including portfolio management and financial advice. With the rise of online stock market transactions, brokers also provide several platforms to enable investors and traders to access the stock market.

How Brokerage Houses Support Traders

In the past, brokerage firms acted as the representatives of their clients on the physical stock exchange floor, executing buy and sell orders based on their instructions as their legal representatives. These firms are registered members of the stock exchange and are required to adhere to the regulatory guidelines enforced by the Securities and Exchange Board of India (SEBI).

Today, India’s stock market has been dematerialized, and trades are conducted online. Despite this shift to digital channels, stockbrokers still perform the same primary function of executing orders on behalf of their clients.

Functions of a Brokerage Firm

  • Order execution: Brokers carry out their clients’ trading orders through online platforms, for which they charge a commission. This commission can either be a fixed fee per transaction or a percentage of the transaction value.
  • Trading platforms: In today’s world, it is crucial for brokerage firms to offer several secure platforms through which clients can place orders. Many of the larger brokers provide trading applications and software that are compatible with smartphones, laptops, and tablets. In addition, trading and investing can also be conducted through phone or chat.
  • Financial advisory: Investors, whether they are new or seasoned, often rely on stock recommendations from their broker. However, brokers are obligated to disclose all information related to the stock, including risks, when making recommendations to clients. This level of transparency is essential to ensure that investors can make informed decisions.
  • Margin financing: Investors who hold accounts with major brokerage firms can take advantage of margin funding facilities, which allows them to borrow funds from the broker to take larger positions in the market.

Types of Brokers

There are three primary types of brokers that a stock investor or trader can consider: full-service brokers, discount brokers, and robo-advisers.

  1. Full-service brokers: Full-service brokers are financial professionals who offer a wide range of services to their clients, including investment advice, financial planning, portfolio management, research reports, and trading platforms. They typically charge higher fees than other types of brokers, but provide a more comprehensive suite of services. Full-service brokers are often best suited for investors who are looking for personalised advice and assistance with managing their investments. They can also be helpful for investors who are new to the stock market and want guidance on how to build a diversified portfolio.
  2. Discount brokers: Discount brokers are brokers who offer basic trading services at a lower cost than full-service brokers. They may not provide investment advice or portfolio management, but they can execute trades quickly and efficiently. Discount brokers typically charge lower fees and commissions than full-service brokers, making them a popular choice for investors who are comfortable making their own investment decisions and managing their own portfolios. Discount brokers are often best suited for experienced investors who are looking to save on trading costs and do not require extensive guidance from a broker.
  3. Robo-advisers: Robo-advisers are a type of brokerage service that provides automated investment advice and portfolio management using algorithms and computer programs. They use data analysis and algorithms to determine the best investment options for their clients based on their risk tolerance, financial goals, and other factors. Robo-advisers typically charge lower fees than full-service brokers and can be a convenient option for investors who want to invest in a diversified portfolio but do not have the time or expertise to manage it themselves. They are also suitable for tech-savvy investors who prefer a digital platform for managing their investments.

How to Choose a Stockbroker

Choosing a stockbroker can be an important decision for investors. Here are some key factors to consider when choosing a stockbroker:

  • Reputation and Credentials: Look for a broker with a good reputation and relevant credentials such as licences and certifications.
  • Fees and Commissions: Compare the fees and commissions charged by different brokers to find one that suits your budget.
  • Range of Services: Consider what services the broker offers and if they match your investment needs.
  • Trading Platforms: Check if the broker offers easy-to-use and reliable trading platforms.
  • Research and Analysis: Evaluate the quality of the broker’s research and analysis tools.
  • Customer Service: Look for a broker who provides excellent customer service and support.
  • Regulatory Compliance: Make sure the broker is registered with the appropriate regulatory bodies and is in compliance with all relevant regulations.

By considering these factors, investors can make an informed decision when choosing a stockbroker.


If you are interested in investing and trading in the stock market, you will be required to open demat and trading accounts. You can explore different account options, such as standalone demat and trading accounts, or a 2-in-1 account that combines both types of accounts.

Deciding whether to opt for a full-service broker or a discount broker will depend on your specific requirements. If you have a good understanding of the market, you can potentially save on costs by choosing a discount broker. However, if you are a beginner in the stock market and require guidance at every step, or if you lack the time or inclination to carry out market research and identify suitable trading opportunities, a full-service broker that offers educational resources and in-depth research insights would be more suitable for your needs.

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