Due Diligence: Read and post before going for a broker.

neo1599

Active Member
#1
Hello

The aim of this thread: Due Diligence of Brokers before joining up.

With so many discount/regular brokers popping up all over think it will be a good idea to put up a thread on Due Diligence of brokers before you place your money with one.

The questions(basic) which comes to mind:

1- Physical address of the Registered Company.

2- Visit to Physical address.

3- Years of operation.

4- Legal/arbitration cases, if any.

5- Exchange membership no. and type of membership.

6- No. of Empoyees. Best to list city and support staff for different
exchanges.

7- Time frame for payout and pay-in.

8- Margin Requirement. (Noticing a variation here)

9- Instruments available for trading. (Ex: MCX brokers will usually not let you trade certain products, infact will not even know all the products, learned the
hard way)

10- RMS system and in cases of their mistake, response and reversal time frame.

11- Any previous regulatory action.

12- Ph. no.s and accessibility of top brass incase of requirement.

13- Turnover details and charge details. (This is where most brokers earn a lot without knowledge of most clients)

14- Reference no. of any client.
----------------------------------------------------------

This is just a short list of questions, I am sure a lot of experienced members can add more questions to the list.

RKSV and Zerodha are most prominent discount brokers with reps on the site. Would appreciate if they can start by giving us these answers. Would make people much more comfortable and secure going into this.

Send the list after it has been completed to your broker and get the answers and post here, help others and yourself make an informed decision with regard to brokers.

Cheers
 

neo1599

Active Member
#4
Hello

The aim of this thread: Due Diligence of Brokers before joining up.

With so many discount/regular brokers popping up all over think it will be a good idea to put up a thread on Due Diligence of brokers before you place your money with one.

The questions(basic) which comes to mind:

1- Physical address of the Registered Company.

2- Visit to Physical address.

3- Years of operation.

4- Legal/arbitration cases, if any.

5- Exchange membership no. and type of membership.

6- No. of Empoyees. Best to list city and support staff for different
exchanges.

7- Time frame for payout and pay-in.

8- Margin Requirement. (Noticing a variation here)

9- Instruments available for trading. (Ex: MCX brokers will usually not let you trade certain products, infact will not even know all the products, learned the
hard way)

10- RMS system and in cases of their mistake, response and reversal time frame.

11- Any previous regulatory action.

12- Ph. no.s and accessibility of top brass incase of requirement.

13- Turnover details and charge details. (This is where most brokers earn a lot without knowledge of most clients)

14- Reference no. of any client.
----------------------------------------------------------

This is just a short list of questions, I am sure a lot of experienced members can add more questions to the list.

RKSV and Zerodha are most prominent discount brokers with reps on the site. Would appreciate if they can start by giving us these answers. Would make people much more comfortable and secure going into this.

Send the list after it has been completed to your broker and get the answers and post here, help others and yourself make an informed decision with regard to brokers.

Cheers

Add Q: Are all contracts, as and when available, on exchange tradeable?

IIFL does not allow you to trade, currently,: ALUMINIUM 30OCT expiry, I am sure there are more, but this is the only one I have tested.

After detailed discussion they are still not willing to answer email in this regard or open the contract for trading after explicit request on paper.

Beware and steer clear.

Cheers
 

whisky

Well-Known Member
#5
Hello

The aim of this thread: Due Diligence of Brokers before joining up.

With so many discount/regular brokers popping up all over think it will be a good idea to put up a thread on Due Diligence of brokers before you place your money with one.

The questions(basic) which comes to mind:

1- Physical address of the Registered Company.

2- Visit to Physical address.

3- Years of operation.

4- Legal/arbitration cases, if any.

5- Exchange membership no. and type of membership.

6- No. of Empoyees. Best to list city and support staff for different
exchanges.

7- Time frame for payout and pay-in.

8- Margin Requirement. (Noticing a variation here)

9- Instruments available for trading. (Ex: MCX brokers will usually not let you trade certain products, infact will not even know all the products, learned the
hard way)

10- RMS system and in cases of their mistake, response and reversal time frame.

11- Any previous regulatory action.

12- Ph. no.s and accessibility of top brass incase of requirement.

13- Turnover details and charge details. (This is where most brokers earn a lot without knowledge of most clients)

14- Reference no. of any client.
----------------------------------------------------------

This is just a short list of questions, I am sure a lot of experienced members can add more questions to the list.

RKSV and Zerodha are most prominent discount brokers with reps on the site. Would appreciate if they can start by giving us these answers. Would make people much more comfortable and secure going into this.

Send the list after it has been completed to your broker and get the answers and post here, help others and yourself make an informed decision with regard to brokers.

Cheers

Hi Neo,

Can you please put some more light on my highlighted points in red.. Why these checks are important for dealing with any broker?
 

neo1599

Active Member
#7
Hi Seema

1- Physical address of the Registered Company:

This is very important mainly because you don't want to be trading with a company whose registered office exists. Multiple times you will find Registered offices to be small out of the way places.

In essence it helps form a more complete picture of the company.

2-Visit to Address:

This one is again to give a more complete picture of the company:

If I were to trust anyone with a Rs. I need to see where they are based and if they are actually present at the address given.

3-Years of Operation:

A company with years of operation behind it would have more of my trust as compared to a new start-up with possibly a six month background. This might be for higher quantity traders. If my account has: 1 crore at any point I would like to know my funds are safe. While this can never be ensured(eg. MF Global, PFGBest etc), I would rather turn over every stone rather than be stuck thinking I could have done more research.

4- Exchange membership No. & type of membership:

There are different type of memberships, I would like to trade with a certain type of member who can give me better access to the market than say a Trading member. Also this affects TO charges etc.

The willingness of a company to go in for a certain type of membership also shows the company's commitment and possibly growth(?) over the years.

5- List of Employees by city:

I will just give you an example:

Recently while trading with IIFL I had a position(big) in GOLD, I set a SL order. Somehow the order was changed and started executing ALUMINI instead of GOLD SL. The price went above SL, looking at huge losses. So I call up their trading desk and I am informed none of the Employees(for MCX) are in office(reasons given) and I would get an answer only in the morning.
Sent mail and am yet to get a reply.
Luckily market came back to my SL level and I closed the position after understanding whether that order was in the system or not, on my own.
Same order ID but different trade, strange does not cover it.

So to avoid such situations, get to know how many people are in the office and how things work.

Access to higher levels is a must.

---------------------------------------------

Even if you trade with a margin of 100 Rs. its your money and you should do as much DD as possible

Cheers
 

whisky

Well-Known Member
#8
Neo,

Really appreciate your efforts in putting the best points together. I hope it will work as a true eye opener for all the traders & investors to deal with the right broker.

:thumb:
Seemavanvani at Gmail
 
#9
Hello

The aim of this thread: Due Diligence of Brokers before joining up.

With so many discount/regular brokers popping up all over think it will be a good idea to put up a thread on Due Diligence of brokers before you place your money with one.

The questions(basic) which comes to mind:

1- Physical address of the Registered Company.

2- Visit to Physical address.

3- Years of operation.

4- Legal/arbitration cases, if any.

5- Exchange membership no. and type of membership.

6- No. of Empoyees. Best to list city and support staff for different
exchanges.

7- Time frame for payout and pay-in.

8- Margin Requirement. (Noticing a variation here)

9- Instruments available for trading. (Ex: MCX brokers will usually not let you trade certain products, infact will not even know all the products, learned the
hard way)

10- RMS system and in cases of their mistake, response and reversal time frame.

11- Any previous regulatory action.

12- Ph. no.s and accessibility of top brass incase of requirement.

13- Turnover details and charge details. (This is where most brokers earn a lot without knowledge of most clients)

14- Reference no. of any client.
----------------------------------------------------------

This is just a short list of questions, I am sure a lot of experienced members can add more questions to the list.

RKSV and Zerodha are most prominent discount brokers with reps on the site. Would appreciate if they can start by giving us these answers. Would make people much more comfortable and secure going into this.

Send the list after it has been completed to your broker and get the answers and post here, help others and yourself make an informed decision with regard to brokers.

Cheers
Good points to understand the reliability of your broker.:clapping::clapping:
 
#10
1- Physical address of the Registered Company:

This is very important mainly because you don't want to be trading with a company whose registered office doesn't exists. Multiple times you will find Registered offices to be small out of the way places.

In essence it helps form a more complete picture of the company.


2-Visit to Address:

This one is again to give a more complete picture of the company:

If I were to trust anyone with a Rs. I need to see where they are based and if they are actually present at the address given.

3-Years of Operation:

A company with years of operation behind it would have more of my trust as compared to a new start-up with possibly a six month background. This might be for higher quantity traders. If my account has: 1 crore at any point I would like to know my funds are safe. While this can never be ensured(eg. MF Global, PFGBest etc), I would rather turn over every stone rather than be stuck thinking I could have done more research.

4- Exchange membership No. & type of membership:

There are different type of memberships, I would like to trade with a certain type of member who can give me better access to the market than say a Trading member. Also this affects TO charges etc.

The willingness of a company to go in for a certain type of membership also shows the company's commitment and possibly growth(?) over the years.

5- List of Employees by city:

I will just give you an example:

Recently while trading with IIFL I had a position(big) in GOLD, I set a SL order. Somehow the order was changed and started executing ALUMINI instead of GOLD SL. The price went above SL, looking at huge losses. So I call up their trading desk and I am informed none of the Employees(for MCX) are in office(reasons given) and I would get an answer only in the morning.
Sent mail and am yet to get a reply.
Luckily market came back to my SL level and I closed the position after understanding whether that order was in the system or not, on my own.
Same order ID but different trade, strange does not cover it.

So to avoid such situations, get to know how many people are in the office and how things work.

Access to higher levels is a must.


---------------------------------------------

Even if you trade with a margin of 100 Rs. its your money and you should do as much DD as possible

Cheers
Some more good points highlighted.:clapping::clapping:
 

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