Indian Stock Broking Industry & Franchisee Business Model (2015)

Sumit Kumar Singh
SMC GLOBAL SECURITIES, LINK ROAD MALAD(w), MUMBAI
SUMMER PROJECT REPORT
19TH
MAY TO 17TH
JULY

Topic: ‘Indian Stock-Broking Industry &
Franchisee Business Model’
MMS SUMMER PROJECT REPORT’
SUMIT KUMAR SINGH Page 1 of 72
A PROJECT REPORT ON
INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE
BUSINESS MODEL
FOR
SMC GLOBAL SECURITIES LTD.
BY
SUMIT KUMAR SINGH
MMS: SEM III Specialization: FINANCE Roll No: 86
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT
OF
MASTER OF MANAGEMENT STUDIES
ACADEMIC YEAR 2015-16
Submitted to Prof. (SRINJAY SENGUPTA)
ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH
MUMBAI - 400092

A PROJECT REPORT ON
INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE
BUSINESS MODEL
FOR
SMC GLOBAL SECURITIES LTD.
BY
SUMIT KUMAR SINGH
MMS: SEM III Specialization: FINANCE Roll No: 86
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT
OF
MASTER OF MANAGEMENT STUDIES
ACADEMIC YEAR 2015-16
Submitted to Prof. (SRINJAY SENGUPTA)
ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH
MUMBAI - 400092

CERTIFICATE
This is to certify that the project work titled “INDIAN STOCK BROKING INDUSTRY AND
FRANCHISEE BUSINESS MODEL” is a summer internship work carried out by Mr.
SUMIT KUMAR SINGH during 2015
The project was completed for (SMC Global Securities Ltd.), under the guidance of Mr.
SURENDER KAMBOJ (Sr. Manager Business Development)
I further certify that the said work has not been submitted in the part or in full, to any other
University.
Date: ______________
Prof. Srinjay Sengupta
Project Guide
Dr. Manoj Bhatia
Director

DECLARATION
I, Mr. SUMIT KUMAR SINGH, student of Aditya Institute of Management Studies and
Research, MMS (Semester III) hereby declare that I have completed the summer internship
project on “INDIAN STOCK BROKING INDUSTRY AND FRANCHISEE BUSINESS
MODEL” with SMC GLOBAL SECURITIES LTD in the Academic year 2015-2016. The
information submitted is true & original to the best of my knowledge.
Date: ______________
Signature
Sumit Kumar Singh
MMS
Finance
86

ACKNOWLEDGEMENT
I would like to thank SMC Global Securities Ltd. and Aditya Institute of Management studies and
Research for giving me an opportunity to learn and pursue my Summer Internship and understand about
Finance and Research aspects.
I would like to thank and express my sincere gratitude to Surender Kamboj (Sr. Manager Business
Developmet). His constant encouragement, valuable insights and attention to detail had made this
exercise, a great learning experience.
I am also thankful to Sahil Gaikwad (Sr. Manager Business Development) who contributed his
valuable time and gave valuable insights during the development of the project.
I am also thankful to Dr. Manoj Bhatia (Director, Aditya Institute of Management Studies And
Research) and my institution, for giving me an opportunity to undergo this learning experience
Special thanks to Prof. Srinjay Sengupta for her valuable guidance in completing this project and
helping me to understand this project better and supporting me with her expertise on the same to make
my project worth for my own benefit and also for the overall benefit of the objective of the summer
project.
Last but not the least; I take pride in thanking my family, siblings and friends for their much valued
support.

Table of Content:
Sr. No Topic Page
List of Tables
List of Figures
List of Symbols, Abbreviations and Nomenclature (Optional )
1 CHAPTER I : INTRODUCTION 8
1.1 Research Background 8
1.1.1 Detail of company 8
1.1.2 Details of industry 17
1.1.3 Details of my department 22
1.2 Identified Problem 23
1.2.1 Need for study 24
1.2.2 Objectives & Scope 25
2 CHAPTER 2 : LITERATURE SURVEY 27
3 CHAPTER 3 : METHODOLOGY 28
3.1 Type of Project 28
3.2 Target respondents 28
3.3 Assumptions, Constraints and Limitations 29
3.4 Sampling Methods 30
4 CHAPTER 4 : DATA ANALYSIS AND INTERPRETATION 31
4.1 Survey on ‘Indian Stock-broking Franchisees Business Model’ 31
4.2 Top Stock Brokers, And their competitive schemes 39
4.3 AUTO TRENDER (A web based auto-tracking software) 45
5 CHAPTER 5: CONCLUSIONS 58
5.1 Summary of Findings 58
5.2 Suggestions & Recommendations 61
5.3 Conclusions 64
5.4 Directions for Future Research 65
6 SILC details (Summer Internship Learning Curve details) 66
6.1 Annexure 1(a): Main task report
6.2 Annexure 1(b): Work plan & status report
6.3 Annexure 1(c): Suggestion report

List of Table
Table and Caption Page No
Table 1.1 : No. of Stock Brokers & Sub-Brokers in Cash Segment 19
Table 1.2 : No. of Stock Market Participant over a period of time 20

List of Figures
Figures and Caption Page No
Figure 1.1 : No. of Stock Exchanges in India 18
Figure 1.2 : No. of Stock Brokers & Sub-Brokers in Cash Segment 19
Figure 1.3 : FPI Investments in Equity and Debt Segment 20
Figure 4.1 : Composition of Sample Set 33
Figure 4.2 : Area Covered for survey 34
Figure 4.3 : Rating Graph 35
Figure 4.4 : Deposit Requirement 36
Figure 4.5 : Exposure time 36
Figure 4.6 : Brokerage sharing ratio 37
Figure 4.7 : Delay Payment Charges 37
Figure 4.8 : Demat Charges 38

List of Symbols, Abbreviations and Nomenclature
AP Authorized Person
ASBA Application Supported by Blocked Amount
SCSB Self-Certified Syndicate Banks
SE Stock Exchange
Na Not Applicable
DP Depository Participant
RMS Risk Management & Surveillance
SEBI Securities Exchange Board of India
IRDA Insurance and Regulatory Development Authority
AMS Annual Maintenance Charges
RM Relationship Manager

EXECUTIVE SUMMARY
Financial year FY14, was yet another difficult year for the domestic brokerage industry despite
the pick-up in trading volumes in the latter half of the year. The rupee volatility, current account
deficit, fiscal deficit, persistent inflation along with perceived delays in policy formulation
together contributed to erosion in investor confidence in the Indian capital market for a major
part of the year. However, perception of improvement in major macro-economic indicators
buttressed expectations of the economy bottoming out and led to an improvement in the global
risk perception of India in the later part of the last fiscal. In anticipation of a stable national
government post elections in May 2014, the Q4FY14 FII inflows of USD 9.4 billion infused
optimism in an otherwise lackluster year for the Indian capital markets. Not only did the
benchmark indices scale newer highs in March 2014 and continued their upward march in April
2014, even broader based mid-cap indices displayed a significant uptick in Q4FY14.
At the industry level, Equity Average Daily Volumes (ADV) rose by ~22% to Rs. 511 trillion
in FY14 buoyed by the continued rise in volumes of option trading, which accounted for ~78%
of the overall market volumes in FY14 (~76% in FY13). Despite the modest rise of 2% in FY14
after the last few years of steady decline, the proportion of cash volumes to overall traded equity
volumes continued to decline to 6.5% as compared to 7.8% in FY13. On the other hand, futures
volumes rose by ~19% in FY14 while options volumes displayed a strong growth of 25% over
the same period. Anecdotal evidence suggests that more and more non-institutional investors
have been taking a liking to trading in options. A broad based investor segment could ensure
that the dominant share of options volumes to total equity volumes continues over the medium
term

At the industry level, Equity Average Daily Volumes (ADV) rose by ~22% to Rs. 511 trillion
in FY14 buoyed by the continued rise in volumes of option trading, which accounted for ~78%
of the overall market volumes in FY14 (~76% in FY13). Despite the modest rise of 2% in FY14
after the last few years of steady decline, the proportion of cash volumes to overall traded equity
volumes continued to decline to 6.5% as compared to 7.8% in FY13. On the other hand, futures
volumes rose by ~19% in FY14 while options volumes displayed a strong growth of 25% over
the same period. Anecdotal evidence suggests that more and more non-institutional investors
have been taking a liking to trading in options. A broad based investor segment could ensure
that the dominant share of options volumes to total equity volumes continues over the medium
term
Consequently, the domestic institutional brokers’ share has slipped to ~25% while that of the
foreign brokers has strengthened to ~75% compared to the usual one-thirds and two-thirds share
respectively in the past. Also, as a large proportion of incremental flows have been from long-
only funds, the penetration of Direct Market Access (DMAs) has stabilized at ~30-35% of
overall volumes. ICRA notes signs of consolidation in the industry as many small and mid-
sized foreign brokers have cut down operations significantly. In ICRA’s view, as the cycle
turns, large brokers who have withstood this test of the last few years successfully may be better
positioned to ride the possible upside.
On the retail equities side, the going remained tough as the retail participation was at multi-year
lows for a large part of FY14. Post the strong FII inflows in Q4FY14, retail volumes also saw
traction and were higher by 5-25% in March - April 2014 as compared to the average of the rest
of the year. However ICRA notes that the same exuberance has not been seen consistently
across retail brokers and the sustainability of this increase in retail participation remains a
question.

Three trends pertaining to FY14 are worth highlighting. One, recognizing the downturn was
more protracted than earlier estimated, ever rising costs of servicing customers, compliance
costs as well as connectivity costs in an environment seeing pressures on revenue is causing
some of the larger standalone brokers to change their positioning and incrementally focus on
the affluent client segment from mass markets. To control costs, while the sales teams continue
to be pruned down, the brick and mortar models (including franchisee route) are now being
consolidated. Smaller clients are being persuaded to go online as servicing them becomes
increasingly unviable. However, while letting go of some clients can be acceptable to larger
brokers, the smaller brokers cannot afford any such luxury and continue to face challenges
regarding their future.
A Snapshot of Report:
 An exhaustive attempt has been made to understand the Indian Stock Broking Industry,
and their franchisee/AP’s business model.
 For understanding the Indian Broking Industry, secondary data have been used from
different web based sources. And, in order to understand the franchisee business model
from root level, primary survey has been undertaken, by visiting at different franchisees
places in selected areas in Mumbai.
 To understand the different products in stock broking business, the company (SMC
Global)’s booklet, and the knowledge of others who are working in SMC have been
utilized.
 An attempt has been made to understand the software that the company uses to trade in
stock market (Technological Part)
 Summary of the findings, and suggestion & recommendation have been made
 Other ancillary things like Annexures (Timely Work Planning & Execution Report)
have been attached at the end of this report.

CHAPTER 1
1.1 Research Background
1.1.1 Details about the company (SMC Global Securities Ltd.)
stablished In 1994, SMC is a well-diversified financial services company in India
offering services across brokerage (across the asset classes of equities (cash and
derivatives), commodities and currency), investment banking, wealth management,
distribution of third party financial products, research, financing, depository services, insurance
broking and clearing services and real estate advisory services to corporate, institutional, high
net worth individuals and other retail clients.
As one of the financial institutions in India in the broking and financial products distribution
segment, SMC believes that its ability to identify emerging trends in the Indian capital markets
sector and creating business lines and service offerings around them, has given us a competitive
edge over other participants in the industry. It believes in the wide range of products and
services that it offers enables it to build stronger relationships with its clients and cross sell its
products. In addition, its diverse portfolio reduces our dependence on any particular product,
service or customer and allows it to exploit synergies across its businesses.
E

SMC services its clients through a network of 50 branches including overseas office at Dubai
and over 2,400 registered sub-brokers and authorized persons with a PAN-India presence.
Additionally, to support our distribution of third party financial products, SMC has more than
23,000 registered associates/service providers who are engaged with it on a non-exclusive basis
under its banner.
2,521
Employee
50
Branches
23000
Registered
-Associate
2433
Sub-
broker/AP
SMC Quantified

Products & Services
1 Broking
a) Equities & Derivatives
SMC constantly helps clients with strategies for equity and derivatives investment,
recommendations for trading on futures & options, hedging with Nifty and other products and
opportunities of near risk free arbitrage between various segments.
b) Currency
SMC believes in the tremendous potential of currency future to become a dominant force of the
Indian financial market with a turnover which can outperform even equity and commodity
segment.
SMC Comex International DMCC (part of SMC Group) is one of the clearing and broking
members of Dubai Gold and Commodities Exchange (DGCX). It offers trading in Forex
(USD/INR, USD/EUR, USD/GBP, USD/JPY), Gold, Silver, Crude (WTI & Brent) and Steel
Rebar Contracts.
c) Commodities
SMC Comtrade Limited, a key constituent of SMC Group of Companies, came into existence
at the very start of Commodity Exchanges in India. With nationwide presence, it enables the
Distribution
Wealth Management
Online TradingBroking
Equity & Derivatives, currency,
Commodity, depository,
institutional broking, clearing,
loan against securities
Research
Investment BankingInsurance

retail & corporate investors to diversify their portfolio and enjoy the benefits of commodity
trading
d) Depository
SMC, as a Depository Participant, offers depository accounts to individual investors as well as
to corporate houses, which enables them to trade in the dematerialized environment.
e) Institutional Broking
Institutional Broking Services at SMC cater to the investment needs of leading domestic and
foreign institutional investors backed by research. This division is a one-stop investment
gateway and knowledge repository for the clients, servicing their unique and sophisticated
needs.
f) Clearing Services
SMC is one of the clearing members, which currently manages the clearing services for trading
members in different segments of different exchanges.
g) Loan against Securities
Moneywise Financial Services Pvt. Ltd. (MFSPL), registered as a non-banking financial
company (NBFC), is a subsidiary of SMC Global Securities Ltd. offers loan against securities
of shares.
2 Distribution
SMC offers distribution services of IPO, Mutual Funds, Public Issues, Company Fixed
Deposits, Bonds, Acquisitions and Mergers through its network of branches across India. SMC
also provides retail application financing in IPO’s, FPO's & Bonds. SMC assures you a hassle
free transaction experience. It focuses on offering integrated solutions for client’s investment
needs.

3 Research
With the EIC (Economy, Industry, Company) approach, SMCs Research team offers Research
reports covering investment summary, Equity Trend, sector trends, commodity trend, Currency
Trend, along with the trend of world markets,. The same is covered in its weekly magazine
“Wise Money”. SMC have a team of experienced analysts in all the segments such as Equity,
Commodity, Derivatives, Mutual Funds and Currency.
4 Online Trading
SMC Online is gateway of youre financial needs. Now, you can invest online in Equities,
Commodities, IPOs, Mutual Fund Schemes and Currency Futures anywhere anytime. You can
access a multitude of resources like live quotes, charts, research, advice and online assistance
to help you take informed decisions. You can also access your account from anywhere using
our Call-N-Trade services. So get empowered and enrich your experience of online trading,
which opens the door to a whole new world of possibilities to get convenient & hassle-free
online stock trading experience.
5 Wealth Management
At SMC Investments & Advisors Ltd., it brings together a
Comprehensive knowledge base with over two decades of experience to design customized
solutions. Its dedicated Wealth Managers develop personalized wealth management strategies
for its clients by listening to them and understanding their financial needs and goals. its
investment solutions cater to the financial needs of high net-worth individuals, retail clients,
corporate houses and
financial institutions.

6 Investment Banking
SMC Capitals Limited is the Investment Banking arm of
SMC group and is a SEBI registered Category I Merchant Banker with strong management
team; financial sponsors and corporate partners to help corporate clients achieve their financial
and strategic goals. We offer a wide spectrum of investment banking services covering
Corporate Advisory, Public Issues Management, Capital Restructuring, Private Placement and
Debt Syndication, Merger & Acquisition Advisory, Valuation Services and ESOP.
7 Insurance
SMC offers risk management services and a range of
Insurance solutions through its subsidiary company SMC Insurance Brokers Pvt. Ltd. The
company holds a Direct Insurance Broker's license from Insurance Regulatory and
Development Authority (IRDA) and provides a wide array of Life Insurance and General
Insurance products under professional guidance of experts in the field. SMC provides
customized solutions to individual clients, small and medium enterprises as well as to the
leading corporate houses and institutions across the country.
8 SMC Real Estate Advisory
At SMC Real Estate Advisory, It offers real estate broking
and advisory services. SMC Real Estate has its registered office in Noida and corporate office
in New Delhi. SMC Teams are empanelled with various renowned developers and real estate
service providers with an objective to provide diverse real estate solutions on PAN India basis
to its valued client’s best suited to their needs and requirement.

Trade with SMC easily (At any time, from anywhere)
No matter where are you, Trade with SMC Online’ and you can trade over world’s leading
stock exchanges.
Trade with SMC, by using your favorite device. Use your TAB or SMART PHONE to trade
easily, any time/ anywhere.

Recognition & Awards
In 2015,
Property Consultant of the Year-Residential (ABP News)
Best financial service provider (ASSOCHAM)
In 2014,
Best Equity Broking House – Derivative Segment (BSE)
Best Commodity Broker – (ASSOCHAM)
In 2013,
Fastest Growing Equity Broking House- Large Firm (BSE)
Emerging SME Investment Banker (ASSOCHAM)
& Many More…..

Memberships & Registrations
 Trading Member of NSE (Cash, F&O, and Currency), BSE (Cash, F&O), MCX-SX
(Cash, F&O, and Currency), MCX, NCDEX, NMCE, ICEX, ACE, UCX, USE,
NCDEX SPOT & DGCX.
 Clearing Member in NSE (F&O, Currency), BSE (F&O), MCX-SX (F&O, Currency),
MCX, NCDEX, NMCE, ICEX, ACE, UCX, USE, NCDEX SPOT & DGCX
 Depository Participant with CDSL, NSDL & Comtrack (SEBI approved Qualified
Depository Participant (QDP))
 Category 1 Merchant banker, Registered with SEBI
 Corporate Insurance Broker for Life & General Insurance, Registered with IRDA
 Distributor of IPOs & Mutual Funds, Registered with AMFI
 Portfolio Management Services (PMS), Registered with SEBI
 Non-Banking Financial Company (NBFC), Registered with RBI

1.1.2 Overview of Industry
With the participation and turnover in India Equity Market is growing strongly in recent years,
the Indian Stock Broking Industry is going through a transformation phase. In last one year the
stock broker industry in India has seen many significant changes.
The new generation of discount brokers has changed the face of the brokerage industry.
Thousands of traders and investors moved to the discount brokers in last one year. The high
performance trading platforms, good customer service and off course saving of over 60% on
brokerage made them try these services.
Unlike traditional broker who spend lot of money on advertising their services, the discount
brokers has grown through word-of-mouth. The discount brokers are the future of the brokerage
industry and if you have not tried them yet, It’s strongly advisable you to choose one of them
and try. You will not regret your decision.
MCX-SX, India's new stock exchange, got permission to trade in equity. This will give stiff
competition to existing players like BSE and NSE in coming years. This is in the benefit of
stock traders and investors as this will eventually bring down the cost of trading.
Announcement of BSE SME and NSE SME exchanges allowing small and medium enterprises
to raise funds from capital market. 13 SME companies listed on the SME platform in the first
year itself and many more are in line.
SEBI introduced 'No-Frill Demat Account' for small investors, which significantly reduces the
AMC charged by the demat account providers. You don't have to pay the AMC, which generally
ranges from Rs 400 to Rs 800 a year, if you hold securities with the value of lesser then Rs
50,000. AMC is limited to Rs 100 if the portfolio value reaches up to Rs 2 lakhs. This will bring
larger retail participation in the stock market.

SEBI has done many IPO reforms this year. One key decision was the allotment of a minimum
number of shares to retail investors to increase the participation in the market. Wider acceptance
of ASBA by investors this year has helped registrars to reduce the IPO share application
processing time significantly.
Unlike many other large economies around the world, the participation in stock market by retail
investors in India is the lowest. The focus of the Government of India this year was to build
policies to encourage more retail investors to choose equity as a long term investment option.
These policies and reforms will start showing results in coming years and the investors and
broking industry will gain the most from this.
As of December 3, 2012, 52 Banks are acting as SCSBs. Investors may submit their ASBA
Applications to these SCSBs in order to apply for Public Issues. The list of SCSBs include the
likes of Axis Bank, HDFC Bank, ICICI Bank, State Bank of India, Punjab National Bank, UCO
Bank, IDBI Bank among others.
Fig. 1.1 No. of Stock Exchanges in India
19 19
16
17
14
2 3 3 3 34 4 4 4 3
2011-12 2012-13 2013-14 APR13-DEC13 APR14-DEC14
No. of Stock Exchanges in India
SE(Cash) SE(F&O) SE(Currency)
Source: SEBI

Table 1.1 No. of Stock Brokers & Sub-Brokers in Cash Segment
Intermediaries 2011-12 2012-13 2013-14 Apr13-
Dec13
Apr14-Dec-
14
Brokers (Cash Segment) 9,307 10,128 9,411 9,150 7,306
Corp. Brok. (Cash Segment) 4,672 5,113 4,917 4,925 4,196
Sub-Brok. (Cash Segment) 77,165 70,178 51,885 54,846 44,540
Fig. 1.2 No. of Stock Brokers & Sub-Brokers in Cash Segment
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2011-12 2012-13 2013-14 Apr13-Dec13 Apr14-Dec14
Stock Broker & Sub-broker
Brokers Corporate brokers Sub-Brokers
Source: SEBI

Table 1.2 No. of Stock Market Participant over a period of time
Intermediaries 2011-12 2012-13 2013-14 Apr13-
Dec13
Apr14-Dec-
14
DP 854 865 857 866 858
Merchant Bankers 200 199 197 198 198
Bankers to an Issue 56 57 59 56 60
Underwriters 3 3 3 3 2
Credit Rating Agency 6 6 6 6 6
Custodians 19 19 19 19 19
Portfolio Managers 250 241 212 221 193
Investment Advisors Na Na 129 70 239
Depositories 2 2 2 2 2
Fig. 1.3 FPI Investments in Equity and Debt Segment
Equity (in cr.)
Debts (in cr.)
-100,000
0
100,000
200,000
2011-12
2012-13
2013-14
Apr 13-Dec
13
2011-12 2012-13 2013-14 Apr 13-Dec 13
Equity (in cr.) 43,737 104031 79,709 57,514 74,859
Debts (in cr.) 49,988 28,333 -28,060 -63,592 123624
FPI Investments in Equity and Debt Segment
Equity (in cr.) Debts (in cr.)
Source: SEBI

Important Note:
1. Hyderabad Stock Exchange, Coimbatore Stock Exchange, Saurashtra Kutch Stock
Exchange, Mangalore Stock Exchange Ltd, Inter-Connected Stock Exchange of India Ltd,
Cochin Stock Exchange Ltd, Bangalore Stock Exchange Ltd and Ludhiana Stock exchange Ltd
have been granted exit vide SEBI order dated January 25, 2013, April 4, 2013, April 5, 2013,
March 03, 2014, December 08, 2014, December 23, 2014, December 26, 2014 and December
30, 2014 respectively.
2. Delhi stock exchange has been derecognized vide SEBI order dated November 19, 2014.
3. SEBI vide letter dated August 21, 2014 issued no objection to the proposed amalgamation
of United Stock Exchange of India (USE) with Bombay Stock Exchange. USE halted its trading
platform on December 29, 2014 at 12.30 p.m.
5. With the commencement of FPI Regime from June 1, 2014, the erstwhile FIIs, Sub Accounts
and QFIs are merged into a new investor class termed as “Foreign Portfolio Investors (FPIs)”.
All existing FIIs and SAs are deemed to be FPIs till the expiry of their registration.

1.1.3 Details about my Department
I was working in Business Development Department. The main task of this department is to
develop the business chain by bringing prospective franchisees. Stock Market is a place, where
expansion is possible only by making more quality franchisees (Sub-brokers, AP & Channel
Partners)
It is said that ‘Building of structure’ is simple but ‘maintaining the same’ is little difficult. The
same lines are applied here. The employees (Business Developers) are always involved not only
in bringing new franchisees but also maintaining the good relationship with them.
Maintaining the good relationship means;
1 Providing them better infrastructure.
2 Solving their issues/problems related with trading.
3 Offering them bunch of products/services, so that, they can offer to their clients.
4 Technical experts provide them the data about the future expected market move, which helps
franchisees to execute profitable trade.
5 RMS provides them the limit for the better risk management.
As this department is fully responsible for the expansion of business. Their progress on job also
largely depend up their target completion, and their relationship skills.
As, I was placed in this department, initially I was required to do the survey of competitors
franchisees working the selected areas. The main purpose of doing this was to understand the
franchisees business from the deep. And, of course, if you do such kind of survey, you would
understand this much better than by just writing the stuff from secondary data.

1.2 Identified Problem
If you see in Fig 1.2, you will find that over the year, the no. of stock sub-brokers/AP has
declined. However this report will extensively cover the following problems which are faced
by the Stock Brokers (especially by SMC).
1 If you see the no. of stock sub-brokers/franchisees/Authorized Persons have declined
extensively in recent years. So, what are the core reasons behind that?
2 If you see in the market, some franchisees are working well but some are suffering even
too survive in the market. So, what are the reasons behind that?
3 As a stock broker (SMC Global Securities) it’s not too easy to acquire franchisees in the
market. So, why is it like that?
The above problems that have been specified will come across while explain the details of real
market scenario.
However, this report will help you to understand the business model of franchisees/AP. And,
you will get some core information about the role of technical analysis in trading decisions.

1.2.1 Need for Study
As every report says something, and are always helpful as a reference for others. In the very
same way, I am also preparing this report to know/understand/solve the following stuff.
1. Some problems I have already mentioned in the above problem statement. So, off
course, an attempt has been made to understand the reasons behind the mentioned problems.
2. This report will also provide the information about the different kinds of scheme that
under Top 10 stock brokers are offering to its clients and prospective clients to attract more
franchisees/AP
3. This report will also provide the core information about “AutoTrender”. AutoTrender
is a web-based application. It has been developed by SMC indigenously. You will find a full-
fledged information about it in this report.
4. In stock market, ODIN is used intensively for trade, so, you will also find some
information about that
5. An attempt has been made to describe about the franchisees which are working in
different parts of Mumbai (especially in western part of Mumbai).

1.2.2 Objectives & Scope
Objective of this Research/Report
Objective of this research or of this study to provide the general information about the Stock
Market, and, to provide the information about the structure of Stock Broking Companies.
Structures include everything like Trading Platform E.g. BSE INDIA etc., Trading Member
like SMC Global Securities etc., Clearing Houses, Franchisees Business/ Authorized Person.
One important object of this report is to provide the information about the software that SMC
use to provide technical information which helps to predict the market based on real time. And,
with the help of that any person, not necessarily being educated can make profit from it.
As, I visited at many places in Mumbai, So, one of my object from this report to provide the
information about the franchisees working in different parts of Mumbai.

SCOPE/STUDEY AREA
As, this project/study/research will provide the information about the stock sub-broker/AP
doing trading in share market with their respective Trading Member. And, their business model.
And, the kind of support that they get form their Main Trading Member.
And, as I mentioned that this report will also provide the business model of different Trading
Member, and their competitive advantage that they have.
And, especially about the one special software that SMC has indigenously built to track the
market effectively.
The following areas are covered for the above mentioned purpose
1. A field work (survey of competitors in selected areas in Mumbai)
2. Help of different broker’s website have been taken.
3. In order to get the feedback of SMC’s franchisees, callings were undertaken, and also the
main purpose of calling were to solve their issues/problems.
4. And, of course for data purpose, the only reliable source is SEBI’s website, so, some data
were extracted from the SEBI website.

CHAPTER 2: LITERATURE SURVEY
To get the statistical review of Indian stock broking industry, Sebi’s ‘handbook of Indian Stock
broking 2015 has been utilized’. This is the optimum source as for as data is concerned.
Research repot of ‘Abhijit Parikh’ from Amity Global Business School of 2009-11. He was an
intern at SMC. His report has been reviewed to get the basic idea of doing survey.
In order, to get the information about the company (SMC), SMC’s own publishing have been
utilized.

CHAPTER 3: METHODOLOGY
3.1 Type of Project
IT’s a ‘Search and Find Project’. As, an internship, I have selected the topic ‘Indian stock
broking industries and Franchisees business Model’ and got approval from the respective
person in SMC. My main motive is not to define the problem, and build the hypothesis, and
accept or reject the hypothesis.
My motive is to analyze the stock broking industries as a whole. And, also for those who will
study this report, will get an exhaustive idea about the stock mark, business model of Trading
Member, and their sub-brokers, and the analytics that they use for trading.
3.2 Target Respondents
For Franchisees Survey:
For survey, I have visited in some selected areas in Mumbai in Borivali (w), Malad (w),
Kandivali (w), Jogeswari (w), Goregaon (w), Andheri (w), Mahim (w), Matunga (w), Dadar
(w), Ghatkopar (w). I extracted the data (address of SB) from the NSE site. I had selected the
some popular spot, so that I can reach out there easily.
For Understanding the Trading Members Business Model/Rate structure
Help of some specific websites have been taken to compare the revenue model of popular
trading members.

For ‘AutoTrender’
Calling was undertaken to each SMC’s franchisee for finding their status whether they are using
it or not and if there is any problem then at the same time their problems were cured.
3.3 Assumptions/Constraints/Limitations
It has never been easy to do field survey. Because, getting the information from SB is not very
easy.
Constraints:
When I extracted the data form NSE site for Addresses of franchisee, I marked some particular
places, and visited, but what I found that there were no such an offices, and on some address, it
was just a residential address, and some franchisees have even closed their business, and there
were another kind of shops. I visited at ‘around 60 spots’ in above mentioned areas, but, did not
get information from 40 places because of the above stated reasons.
Limitations:
Although lots of rejections, I could be able to manage to get data from around 20 places. But,
whether they have provided me the right data or not, I can’t say exactly. So, I have assumed
that whatever data they had provided me are correct.

3.4 Sampling Method/Data Processing/Tools for Analysis.
Deliberate sampling method has been used for the survey purpose. I have selected those
franchisees which are working under those trading members which are very close competitors
for the SMC Global Securities. Close competitors like’ Motilal Oswal, Sharekhan, ICICI direct,
SBI Securities, IIFL, Religare, Kotak Securities etc.
A Pre-formatted form was provided to me from the Company side itself, and they had given the
instructions that how to collect the data, and what to collect.
Preparation of data, and presentation of the same through the Table & Figure, and suggestion
& recommendation of the same based on the study.

Chapter 4: DATA ANALYSIS AND INTERPRETATION
4.1
Outcome of Survey on
Indian Stock-broking Franchisees Business Model
Now a days, franchisee business is becoming very popular in every country. As far as franchisee
business in stock market is concerned, it is has been in existence for many years. In franchisee
business model, the main broker appoints a sub-broker as its agent who gets or attract retail
client for the main broker. They enter in to a contract called sub-broker-ship agreement, and the
form in which the details are entered is called ‘sub-broker relationship form’. This form govern
the business between 3 parties i.e. the franchiser, the franchisee, and the client. The sub-broker-
ship agreement has to comply with the SEBI rules & regulation.
The sub-brokers/Authorized Person acquires business for the broking firm through his network
or prospective retail clients. And the brokerage firm in turn shares part of the brokerage with
the sub-broker. The sub-broker operates under the brand name of the broking firm.
The broking firm provides the following support
 Marketing and promotional support
 Back-office support
 Research support
 Advisory support and
 Technical support to the franchisee
Setting up entire infrastructure is either born by the sub-broker (franchisee) or is shared with
sub-broker, depends up the terms of agreement. A sub-broker is required to deposit certain
amount with the broking firm as margin money for covering default risk. It has to sign a sub-
broker-ship agreement with the broking firm. The infrastructure means office space, computer

terminals, internet connectivity and some prior experience in the industry as per requirement
specified by the broker.
The account opening charges are charged by the broking firm which include trading account
and demat account. The agreement form contains the details of brokerage that can be charged
by the franchisee to their client.
The brokerage sharing ratio between franchiser and franchisee could wither be a fixed amount
or a percentage of the brokerage generated. The higher the volume generated by a franchisee
the better is its bargaining power to demand a higher share in the brokerage for itself.
A sub-broker can compete with another on different grounds such as product and services, the
trading and demat account opening charges, the brokerage and other charges. AMC (Amount
Maintenance Charges), exposure limit given to client play very important role in attracting the
clients.

Survey Process & Outcomes
I visited at 57 places in selected areas in Mumbai, mostly in western part, and I had a survey
form, which was provided by SMC. It had contained the relational questions as well as
informational questions. Below, I have mentioned the name of 30 franchisees who currently are
working under different Stock-Broker (Member of Stock-Exchange). I found information only
from franchisees because of different reasons, reasons were like some shops were closed down,
and some have just rejected to give any information.
I have picked up some brokers from below tables, and explained about their business model.
Note: Graphical Presentations are done by taking the name of Franchiser, but the details of
business model is from franchisees side
Area Covered
Fig. 4.1 Composition of Sample Set
7
6
22
2
3
2
2
1
1
1 1
Composition of Sample Set
Motilal Oswal Angel IIFL Magnum Anand Rathi Sharekhan
Edelweiss Kotak Arcadia S&S Venture Axis ISE Securities

Fig. 4.2 Area Covered for survey
Franchisees Perception regarding followings relational questions
1) The brokerage firm has created good brand awareness through regular advertisements
2) The brokerage firm provides state-of-art trading facilities.
3) The brokerage firm has effective risk management system.
4) The brokerage firm has competitive rate structure.
5) The brokerage firm provides excellence service support.
(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree
The above questions are based on satisfaction level, but to represent it in better way I have
assigned ratings to these options.
16%
16%
14%
12%
3%
7%
7%
2%
12%
9%
2%
Area Covered for franchisees survey
Borivali Malad Kandivali Goregaon Jogeswari Ghatkopar
Dadar Matunga Mahim Andheri Vile Parle

23 23
20
21
20
22 22
21
22
21
Motilal Sharekhan Magnum Angel IIFL Kotak Anand Rthi Venture Edelweiss Axis
Ratings Graph
Stock Broker
Satisfaction Level Ratings
Strongly Agree 5
Agree 4
Neutral 3
Disagree 2
Strongly Disagree 1
Fig. 4.3 Rating Graph
The above chart explains clearly the perception of franchisees about their Trading Member/
Trading Partner/ Franchiser. Motilal Oswal, Sharekhan, got higher ratings, Kotak, Anand Rathi,
Edelweiss stood at second position, Angel Broking, Venture Securities, Axis stood at third
position and remaining IIFL, Magnum stood at last among all above.
Some popular Stock-brokers like Axis, IIFL have got ratings because of either their profit
sharing is not so competitive or other grounds.

Deposit Amount
Fig. 4.4 Deposit Requirement
Exposure Time (RMS)
Fig. 4.5 Exposure time
100000
100000
200000
100000
100000
10000
100000
Deposit
Motilal
Sharekhan
IIFL
Aand Rathi
Angel Broking
India Nivesh
Magnum
Min 10 k, Mx no
0
2
4
6
8
10
12
Motilal Sharekhan IIFL Aand Rathi Angel Broking India Nivesh Magnum
Exposure Time

Brokerage Sharing Ratio
Fig. 4.6 Brokerage Sharing Ration
Delay Payment Charges
Fig. 4.7 Delay Payment Charges
50
60
50
n/a
50
60
75
50
40
50
50
40
25
0 20 40 60 80 100 120
Motilal
Sharekhan
IIFL
Aand Rathi
Angel Broking
India Nivesh
Magnum
Brokerage Sharing Ratio
Stock Broker Franchisee
18
18
24
18
18
18
18
Dealy Payment Charges (%)

Demat Charges (Inclusive)
Fig. 4.8 Demat Chages
450
1500
750
750
350
750
350
Demat Charges

4.2
Market Share of Top Stock Brokers
And, their competitive schemes
The top 50 broker-members of leading stock exchanges NSE and BSE account for more than
half of the cash market turnover at these bourses and their market shares have reached record
levels in about two decades.
As per the data released by SEBI in its latest 'Handbook of Statistics on Indian Securities
Market', the top-50 members of the BSE commanded a cash segment market share of 57.5 per
cent during the last fiscal till December 2011. This was their highest market share since 1994-
95, from when the data is available.
At the NSE, the cash segment market share of the top-50 members was even higher at 64.3 per
cent, which is also the highest since the fiscal 1994-95.
The top-25 members alone commanded a market share of 48.3 per cent at the NSE during the
first nine months of the last fiscal, while the same was 42.5 per cent in the case of BSE. These
are also the record high figures since 1994-95.
The top-five members, however, commanded a higher market share of 17.5 per cent at the BSE,
as against 16.7 per cent at the NSE.
The top 10 members of BSE had 26.5 per cent share of cash segment, as against 27.6 per cent
in case of the NSE, while the top-100 members of the BSE and NSE had market shares of 73.7
per cent and 78.8 per cent respectively.
The market share of top brokers has risen sharply from the previous year (2009-10) levels --
rising from 51.9 per cent to 57.5 per cent for BSE's top-50 members, and from 42.9 per cent to
48.3 per cent for NSE's.

In terms of the securities also, the top-traded stocks command very high market share, but were
below their record-high levels during the last fiscal till December 2011. The top-five securities
commanded a 19.6 per cent share of total cash segment turnover at BSE, up from 10.2 per cent
in the previous year but way below a record 50 per cent in 2000-01.
At the NSE also, the share of top-five securities stood at 21.6 per cent -- up from 15.3 per cent
in 2009-10, but much below a high of 83 per cent in 1995-96.
The top-100 securities at the NSE commanded 83 per cent cash segment market share last fiscal
till December 2011, up from 68.9 per cent in previous year. It was, however, far off a high of
98.2 per cent in 1996-97.
At the BSE, the top-100 securities commanded a market share of 75.5 per cent last fiscal, up
from 51.5 per cent in 2009-10. It had touched a high of 97.5 per cent in 2000-01
The above listed stock brokers are the most wanted stock brokers in the Indian stock market.
So, knowing their rate structure & their competitive important is very important. SMC Global
Securities comes under top 10 Indian stock broking industry.

A stock brokerage is an investment services company that is primarily involved in the business
of buying and selling stocks and other financial securities on behalf of its clients in return for
a fees or commission. The industry operates under close government regulations that aim to
protect the investing public. A stock brokerage may not open for business without filing for
appropriate registrations and obtaining certain memberships. A stock brokerage may focus on
different investment services and clients. It must also be able to provide a wide range of security
information to clients for investment research and trade selections. As per Section 65(93) of
Finance Act, 1994 “Stock-broker” means a person, who has either made an application for
registration or is registered as a stock broker, in accordance with the rules and regulations made
under the Securities and Exchange Board of India Act, 1992. A retail brokerage serves only
individual investors, whereas an institutional brokerage has the capacity to handle large order
flows from institutional investors such as mutual funds. The objectives of the study are to study
the performance analysis of Stock Brokering Services and providing findings/results and
conclusions based on analysis. Exploratory research design has been adopted. This particular
study is based on secondary data containing annual number, fees & other charges, type and
turnover of registered stock brokers from 2009-2014. The data is collected from sebi.gov.in,
money control.com and comparestockbroker.com various other reports like magazines,
journals, published books and official websites. The statistical tools applied for data analysis in
the present study are descriptive statistics. It is concluded that stock brokering service plays a
major role in mobilizing funds through its expertise in attracting investors to make investment
by its suitable guidance. It has become lucrative service in terms of earning.

 Account Opening Charges of these brokers
If you see Indiabulls charges arountd1375 for demat & trading a/c which is very high, and then
on 2nd
and 3rd
position are HDFC Securities and Axis Direct respectively charging 999 for the
same. SMC Global Securities charge 499 for demat & trading, which stands at 2nd
as for as
lowest charging is concerned.
 AMC (Annual Maintenance Charges)
350
999
600
975
750
999
1375
750
750
550
499
0 200 400 600 800 1000 1200 1400 1600
Angel
Bonanza
Sharekhan
Indiabulls
Kotak
SMC
Account opening charges in Rs.
300
400
275
500
441
550
450
450
50
900
0
0 100 200 300 400 500 600 700 800 900 1000
Angel
Bonanza
Sharekhan
Indiabulls
Kotak
SMC
AMC in Rs.
Source: comparesharebroker.com

Motilal Oswal charges around 900 for annual maintenance of demat & trading a/c, and it stands
very high among the others listed above.
Kotak charges very minimal amount ie Rs 50. And SMC Global does not charge any amount
for maintenance of the same accounts.
 Brokerages Charges
There are two kinds of trading. First is Delivery based trading, and the second one is Intraday
trading. In intraday, you have to buy, and sale your stocks/shares on the same day itself. In
delivery based trading, you buy and keep your shares in your demat a/c to sell at future date at
higher price
Generally, the charges for delivery based trading is higher, because it takes T+2 days to get
clear the trading.
 Delivery-based Brokerage
0.5
0.5
0.5
0.55
0.5
Higher of 25 or 0.5
0.3
0.5
0.59
0.5-0.9
0.3
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
Angel
Axix Direct
Bonanza
ICICI direct
Sharekhan
HDFC Securities
Indiabulls
IIFL
Kotak
Motilal
SMC
Delivery based brokerage in (% of total value)

 Intra-day trading Brokerage
For delivery-based trading, Motilal Oswal’s charges rage around 0.5 to 0.9 which is flexible
but at the same time it is high, if we compare it with others. India bulls and SMC charges lest
amount for the same. And, all others charge around 0.5 %.
E.g. Suppose you buy shares of valuing Rs. 100000, the you will pay 0.5 % of Rs. 100000
which would be around 500 as brokerage.
For intra-day based trading, Sharkhan charges 0.1, which stands highest amongst the others in
the above graph. And, for the same, SMC charges least, which is 0.03 %
Motilal charges Nil for buy, and for sale charges 0.25 to 0.4, which is flexible in nature. Even
there is flexibility in case of HDFC charges.
0.06
0.05
0.05
0.05
0.1
higher of 25 or 0.05
0.05
0.05
0.06
Buy-Nil, For sell-0.25
to 0.4
0.03
0 0.02 0.04 0.06 0.08 0.1 0.12
Angel
Axix Direct
Bonanza
ICICI direct
Sharekhan
HDFC Securities
Indiabulls
IIFL
Kotak
Motilal
SMC
Intra-day based brokerage in (% of total value)

4.3
AUTO TRENDER
(A web based auto-tracking software)
SMC AutoTrender is a web based application that has been developed indigenously. The
advantage of this software is that even a beginner of stock market can easily track the market,
and can take his decision whether to buy or sell any particular scrip.
AutoTrender provides information on the basis of time which vary from 5, 10, 15, and 30 and
for the entire day.
You can even include your favorite scrip in your portfolio, so that, you can keep tracking your
favorite scrips, as and when you want.
This software tracks not only to equity segment but also currency, and commodity.
The only limitation of this software is that, you cannot execute trade with this.

Below is the Screen Shot of AutoTrender

Left side of Interface
Left Side Explanation
Trending lines, which show the scrips
behavior based on time interval
Track Your Portfolio Here
Here you can choose, the market
you want to track e.g. World index,
F&O Stocks, Call/Put etc.
This shows the sentiments of stock/index. Stocks
which are likely to go up fall under more than 60
Companies expected result based on technical
and fundamental analysis.
You can choose your sector from here eg. Auto,
capital good, FMCG, IT etc. It reflects the likely
movements in the sector.

Right side of Interface (Sentiment Box)
This sub-box shows the
sentiment of Scrips in
Future & Options trading.
As you can see currently
140 stocks are in buy
sentiments
This sub-box reflects the
Nifty Sentiments based on
time interval.
As you can see in the next
15 minutes 75% sentiments
are for buy in Intra-day
trade. And, so on.
This sub-box reflects the
sectorial sentiments. The
other features are the same
as in the above case.

Middle Part of Interface (When market shows uptrend)
Here you can select the
scrip/index which you want
Here you can select
time interval
Here you can see the sector’s
index, and, you can select a
particular which you want
These are 9 indicators. If more
than 4 indicates green, then
you can go for buy.
Green-Red=Remaining
7, 8 no. indicates likely
up of market

Middle Part of Interface (When market shows downtrend)
This is the same chart as in the case of above chart but, the only difference is, this is showing
downtrend. So, you should sell you holdings (whether it is Equity, Commodity, Currency or
Derivatives product).
Note: At the same time see the time interval also before buying & selling.
E.g. Suppose all the 9 indicator showing down, and you will be thinking to sell you stocks, but
stock, see the trend of you particular stock for the daylight it is still green, the you should hold
your position.

Right hand-side (bull box, bear box, and message box)
This box shows the scrips which were
up at a particular time.
Here you can see some market news
which are trending.
This shows the opposite of bull.
Which were down at a particular
time.

The upper most important part of Interface
It is called as TICKER
1. Up/Down (5Min & 15 Min) (I)
This ticker line shows the trends for the previous 5 & 15 minutes. All the Green
scrips show the uptrend, and all the red colored scrips show the down trend. So, on
the left side all scrips show the uptrend, and on the right side it’s opposite. (I) stands
for Intra-day trading.
2. T_Funda (15Min & Daily) (I)
This ticker line works on 15 minutes & daily time frame. (P) Stands for positional
trading. This ticker line will help you in execution of positional trading.
3. UP/Down (85% all time)
It shows those scrip which were up/down 85% of total trading session.
4. Strength Up/Down
Strength of stock in co-relation with Nifty
5. Nifty (Option)
You can trade in option while using this ticker

Ex. ACC Scrip
Below is the snapshot of ACC, in the next page you will find the details of that

In the above snap, you can see it’s showing down trend for the previous 5 & 15 minutes, for
Intra-day trading it’s not recommended, but at the same time it’s showing up trend for the
previous 30 & 60 minutes, and also the daily trend is up. So, you can enter in positional trading.
You can take advice of your broker for better deal.
Support means, it cannot go below this, if it goes below from one support then there is a chance
that it can tough second support. And, you can apply same funda in case Resistance.
At the same time you can see other scrips of same industry.

Portfolio Management
Above screen shot is of your own portfolio. You can add any stock in your portfolio which you
want to track.
Effect of World Market
The above snapshot reflect the effect of world index on Nifty. E.g. If SP500 moves 1% whether
up/down, reflection on nifty would be 0.57 times. And, so on for the remaining.

Limitations
1. GAPS: Gaps are areas on the chart where the price of a stock moves sharply up or down,
with little or no trading in between. As a result, the stock chart shows a "gap" in the normal
price pattern.
a) GAP UP OPENING:
In case of gap up opening in the market, software will pick the values of indicators, which
normally follow the prices. i.e trend of the market will be seen as UP in case of gap up opening.
So, it is advised that one should avoid taking trades in stocks, if it opens with a gap up. One
should wait for the market to retrace at least 30% from its highest level and then should initiate
trade matching with all the indicators showing UP.
b) GAP DOWN OPENING:
In case of gap down opening in the market, the software will pick the values of indicators,
which normally follow the prices. i.e trend of the market will be seen as DOWN in case of gap
down opening. So, it is advised that one should avoid taking trades in any stock, if it opens with
a gap down. One should wait for the market to retrace at least 30% from its lowest level and
then should initiate trade matching with all the indicators showing DOWN.
2. NON TRENDING MARKET: As the name”AUTOTRENDER” itself suggest, the software
will “automatically” indicate about the “trend” of the market, based on technical studies.
However, in case of sideways or without specific direction, the trades are expected to remain
limited or imperfect.

3. BULK DEALS IN BULL & BEAR BOX: “High probability buys OR sell stock appears in
bull box or the bear box, when matches volume based criteria. However, in case of any bulk
trade in any particular stock, it cannot get filtered. So, one should keep a close watch and remain
updated about any bulk trade happening in any scrip before executing any trade.
4. EXTREME HIGH VOLATILITY: In “AUTOTRENDER”, “5 minute” as a minimum time
frame is included for any trend detection. It means values of the indicators will also update after
every “5 minute” time interval for trend detection after following movement in prices.
However, in case of extreme volatility, i.e. if the market moves sharply in the opposite
directions within 5 minutes or before 5 minutes, then the strict stop loss (SL) should be placed
to avoid unwanted loss.

CHAPTER 5: CONCLUSIONS
5.1 Summary of Finding
Although there were lot of difficulties while doing survey of franchisees but, as always said,
when you do something which is not easy, gives a real experience, and great learning.
Throughout the survey certain key parameters were identified. A stock broking company has
roles to be played while balancing itself with SEBI compliance and compete with the other
stock brokers registered with NSE, and BSE.
Followings are the key areas, improvement of which improve the business relation between
franchisees and franchiser.
1. Brand Development
This is the key to develop any business. Advertising on various means of media is just the one
of the aspect of nurturing the Brand. Followings are the sub-points which helps to improve the
image of stock-broker.
(a) Publishing the reports and various articles of Indian Economy as well as world
economy.
(b) Encouraging youth is becoming the mainstream for source of investors. Keeping the
mock stock is becoming popular day by day. So, it is important to tap this segment.
(c) Renowned person at the top always creates a different image in the mind of
investors. So, for any stock broker having a great personality in financial area gives
an extra edge to the stock-broker.
(d) Keeping events/seminars creates extra edge to attract more franchisees.

2. Risk Management
This is very sensitive area, and should be taken care of because during the boom all stock broker
performs well but, during recession few survive, therefore it is essential not to get carried away
market jump but stock broking firms always need to assess their risk for which they need to
have cost effective and economically viable business models. Here comes franchisee model
into picture which is most cost effective in short run as well as in long run.
3. Viable Franchisee Model
Franchisee business model always needs a viable business model to improve profitability.
Whenever an application is made by sub-broker to the franchiser or stock broking company,
the company involves certain cost such as scrutinizing the relevant documents and their
verification involves certain cost, companies need to send their RM’s to sub-brokers place to
interview them and verifying whether they possess adequate working knowledge because
sometimes the trading software are different and therefore it requires proper training also,
therefore cost incurred to get a new franchisee should be minimize by developing the viable
model.
4. Continuous Back office support
The support of back office is very important, and essential in all the way. Unless there is support
from back office, the success of franchisee business is not possible. Stock broking industry is
very fast-paced industry and need up-gradation as it comes or issued by regulatory authority.

5. Friendly Policies
Carefully planning the business model, consumer friendly policies or ethical practices while
being in operation of business of the stock building firm can go long way can give the company
tremendous market respect, this principle of transparency and ethics should be well imbibed in
the working culture as well as passing the same ethical principles down to the franchisee owner,
this ethical policy and working transparency should be seen in all the aspect of the stock broking
companies.

5.2 Suggestions & Recommendations
Working under stock-broking firm gave me an opportunities to know the franchisee business
model, how they work with co-ordination of trading member
Expansion of franchisee model is possible from two ways
1) Expand sub-broker-ship
2) Attract more individual, HNI customers
This can be called as a dual role of franchisee model. The more the clients to the franchisee,
more the revenue in terms of brokerage for the franchisee as well as franchiser.
1) Margin Deposit
While doing survey, I came to know that the margin deposit for the franchisees are ranging
from 100000 to 200000. SMC is already competitive in this area as it’s minimum margin
deposit is 50000, and it has many other schemes as it increases it’s margin deposit like free
demat a/c, broking a/c
Deposit Amount Rs. 50000, and this amount can also be deposited in other form like FD
certificate.
1 scheme which, I would recommend towards Commerce Graduate/PG Students
Demat a/c Rs. 300 (including trading a/c). And no transaction charge, no brokerage for buy,
brokerage charge only for sale at a rate, as it has currently 0.3 for delivery based, .03 for intra-
day.

2) Brokerage Flexibility
Franchisees must be given brokerage facility which is very flexible in nature, reason for this is
some clients are regular trader with franchisee they demand preferential brokerage and more
exposure then prescribed limit. The franchisee should generally trust franchisee owner to enable
them to sell/buy its stocks on preferential brokerage at the request of franchisees. This will
enable client retention and such highly traded client can bring in some more customers for
franchisee and such a move should always be on case-to-case basis.
3) Excellent Back-Office Network
The underlying truth of franchisee model is to make earning through relationships and through
providing better services to their customer. Today’s stock broking firms are associated with
Arrays of services in financial products due to suppressed margin in brokerage, the only thing
which is viable is to provide arrays of services to their clients at reasonable rates for which
there should excellent back-office support their franchisee during survey I had come across
various franchisee seen consulting for Mutual Fund, Life Insurance and general insurance
products this kind of service can eventually gather more clients for main business for back-
office support is essential for co-ordination.
4) Matching up to client expectations
Client expect great deal of transparency in the business because money involved is client’s hard
earned money therefor client expect highest level of transparency in business there should be
the code of conduct laid down stating that without clients authorized call trading should not
take place also client should be bothered with requests

to buy or sell particular scrip unless the amount required is showing debit balance in their
account.
5) Choose the right candidate for franchisee
Selection of right candidate is essential who is capable and experienced to handle responsibility
to serve client with understanding and ability to manage client’s wealth these candidate in
reality are brand ambassadors of the stock broking firms.
6) Constant Training & Seminar
Training and workshop should be conducted from time to time to enable franchisee to
update/upgrade their skill set a specialized training on soft skills should also be provided which
can help I dealing with client in a proactive manner.
7) Controlling the Operation Cost per franchise
The overall operation overheads cost per franchisee should be controlled most effectively the
cost incurred per franchisee shouldn’t be more than 20% of the income generated from each
franchisee if this ratio of overhead expenditure and subsequent income is not managed well
then franchisee model cannot be said to be effective and there the branch model in viable

5.3 Conclusion
Success of stock-broking franchisee model depends up on the certain ingredients, which are
controllable or uncontrollable. Uncontrollable includes PESTLE. Political, Economical, Soci-
Culture, Technological, Legal, and Environmental. Out of these the one factor which is
Economical factor can be minimized, if a strong research, and prediction is done before
anything happens, so the loss of stock-market participant can be minimized eg. Hedging.
Internal factors like quality service, competitive offerings, securing brand image, strong
investor relations are the controllable factors which should be monitored continuously, so that
in growing stock market industry, you should also grow without losing your brand.

5.4 Direction for future research
For those who will be referring this project, I would like to given few tips, so that they can make
their project report efficiently. Following points are very useful, and must follow before starting
field survey.
1) NSE database for addressees of franchisees are not always up-to-date. So, while selecting
the address, please ignore the address which belong to society. And, mostly selected the
address which starts with office No.
2) Choose the right time to go in to their office. In morning time from 10 to 1, and then after
3:30. This is because in running market, they will not even listen you. So, it is recommended
to go after 3:30 ‘o’ clock.
3) Refer SEBI website for authentic statistics.
4) Read more about the company in which you are working, and read the previous survey
report. You will get the idea of how to do field survey, and should be in report to present it
in a better way.

The End

Indian Stock Broking Industry & Franchisee Business Model (2015)

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