Organised broking houses are changing the face of the country's retail broking business by offering franchisee memberships at throwaway prices. The paltry sum is in contrast with the lakh, sometimes crore, the traders have to pay to get a stock exchange card.
Even a section of the established brokers, who are finding it difficult to make both ends meet, are weighing the option of replacing their stock exchange cards with a franchise membership being offered by the corporate houses.
Leading the pack is Kotak Securities which has already made a dent in the market by roping in 200 franchise members across the country.
Others in spreading the franchise network include Investsmart India and LKP Securities. Kotak Securities chief executive officer S A Narayan said the company charged one-time fee of anything between Rs 30,000 to Rs 40,000 for software installation. A member has to get a prominent office location and a computer with modem facilities.
He said the franchise network was aimed at ensuring quality service from a reputed broking house. In addition, association with an established broking house reduced the risk elements involved in securities trading, he added.
Of the 200 franchisees, the western market comprising Maharashtra, Madhya Pradesh and Goa account for 50 members. The company has so far 35 members in Kolkata.
Investsmart India branch manager Sanjay Mehta said the company charged nothing as fixed cost for acquiring a franchise membership. "We have a revenue-sharing arrangement with a franchisee," he added.
According to the arrangements, the broking companies act as clearing agents of the franchisees. The franchisee has to settle pay-out and pay-in with the company, which , in turn, clears it with the concerned stock exchanges.
Industry sources said this franchise route would spread the share trading to the nook and corner of the country. This was one of the aims of NSE but it has failed to build up a network so far.
Detractors of the franchise route said it would encourage day trading as any member could not be able to achieve the target set by the stock broking companies by real investments. Day trading might have a negative impact on the franchisee's trading opportunity in a falling market, they added.
