Is it wise to open a brokerage firm now ?

[gjgjgj]

But NSE is going to take over the business of brokerage in next 4/5 years or so.
As my friend wanted to open the same but when he heard this news he gave up...

Thanks,
Milind

Milind Bhai,

As far as my limited knowledge is concerned, I dont think NSE is going to enter the broking business for the same reason SAIL is not entering steel fabrication business or Reliance is not entering Injection Moulding Business.
NSE is just a platform for trading or an exchange. In all likelihood it will be made public (like NYSE , CBOT, LSE and NASDAQ ) but I doubt it will kill the businesses of the brokers.

What will the Association of NSE members of INDIA ( ANMI ) do ?


Thanks in advance,
Gaurav

 

[gjgjgj]

regards brokerage, something like fixed brokeage, irrespective of size of order, like in us, they charge x $ per trade, irrespective of quantity.

Yes I have done ample research on US based brokerage firms and I feel that something can be done to import a BUSINESS MODEL from those guys.

I have also done research on the broking firm SK Global and onlyhalfpaisa.com

They have similar business models. Reduce the cost by
1) Emailing the contract notes.
2) Hire Software from Financial Tech's Wizard "Jignesh Shah" and pay him a monthly fees of Rs 99 ( obviously the client pays this fees )

I dont agree with the 2nd point as it reduces my options of designing the software in a way that I want
A) Gorgeous to look at B) Provide more tools for FNO traders.

In order to have my own software, I will have to pay more for the software and get my own servers in a fast datacenter (I will have to pay for the servers + bandwidth )

BUT this is the price I am willing to pay for differentiating my firm.


I will do it some day. I need some encouragement from Traderji.com.

Regarding trading, yes I have traded on my own account (to disastrous results) and I am of the firm belief that " money is not made my trading but by sitting ".


Thanks in advance,
Gaurav

 

[srisara]

Gaurav,

Well, this thread was so interesting, I was bound to add my thoughts here. I also, took up this excercise of how much it takes to start a brokerage company.

Well, the first source of information was NSE website itself. Before, you even think of opening a brokergage firm, you need to go through Pre Qualifications.

You need to take up NFCM Exam (all details are there in NSE Site). Just, check NSE Site for all the details.

My Calculation has come to around 5-10 Crores of investment to start with. Also, remember, it takes lots of money to establish a branch. Ideally, it is better to start with a Single Branch.

You can comeup with various ideas of how exactly you want the things to run.

Tell me, which customer is happy with all those brokerage houses? Every brokerage firm has its own merits and demerits. It's know fact that the demerits outnumber their merits.

If you can fill the GAP and make the customers happy, then there is a lot of Scope in this.

I presume, stock markets will be there in this world for another 50-75 years to come.

Satya

 

[rajib333]

hi, one thing came to my mind,one may start the business
with minimum no. of branches but providing larger and
expanded service through net-banking and intrnnet -trading facility.
if we look at west , their branches are smaller but more people trade through their own computers, causing a reduction in operating cost and hence an era of fixed bkrage and diff. plans.
only my thoughts.
Rajib.

 

[Trader07]

You could start by becoming a franchisee for one of the well-known brokerage firms ( Religare,Angel,Reliance,Sharekhan,etc.) and learn the nitty-gritty of the broking business.

 

[Czar]

I am not at all hurt. I take it in a positive fashion.

Well the doubts will be there TILL I get the first customer, but the key issue is my belief that I can change the industry with new software tools and using technology, reduce the working capital requirements to a large extent.

How does one come up with a figure of 50 crores. Can it be done using lesser than this amount. I am sure many "mom and pop" brokerage firms started out with much lesser. And why go national in the beginning, go regional to start with ..and with the money you make, go national. Take baby steps. Later start RUNNING.

Now the question that comes to my mind and the one that I want to pose in front of all traderji members who are reading this thread, what is the ideal level of DEEP DISCOUNT brokerage (both for CASH AND FNO) that a startup firm should start with.

While answering this question , please answer from the point of view of an entrepreneur and not from the point of view of a trader. Please do not say FREE coz that wont be possible.

Thanks in advance,
Gaurav

hi I was doing the same niggling some time back, I would suggest instead of going the brokering way, to go the software way since you seem more confident of your abilities there. software will surely sell if you have the right product, even high retailers along with the brokers themselves & always interested in improving their capabilities.

regarding cons about opening brokerage, My turn off was not the present competition but the upcoming one, since many big time firms are coming the India way... they will crack most of the small time brokers

that doesn't mean it will not work, but to start with do you have a circle who has its bigger circle on whom you can at least rely on to begin with ? also in this ad-mad world you gotta go big time on ads.

last but not the least, if this bull bubble bursts, that would be the worst time to enter...

 

[vince]

You could look to Interactive brokers as a model and start of on a smaller scale ofcourse.

 

[gjgjgj]

Dear people,

Thank you so much for your feedback.
There are so many brokerage firms, big firms are entering the field, the bull market cannot last forever, all these are risk factors, but STILL i feel it is worthwhile to start a venture of your own, something that will raise the bar a little higher.

Indiabulls had 4 founders, all IITians, and had great contacts to start with and Laxmi Mittals money and they brought out an IPO @ Rs 19 per share. and look at their success. They have ventured out into real estate, personal loans etc etc. I dont want to go into all that, just a brokerage firm that will give tools of international quality and customer service.

Please have a look at Zecco.com in the US, they are providing zero commissions for upto 40 trades a month. They have amazing customer service and most of the customer service is web based. They have proclaimed that they will not advertise heavily.

Bull and Bear Markets are a part and parcel of all markets ( ask copper or crude traders). I will quote an interesting anecdote here. When I was young and restless in a college hostel, I started a CD writing business.
Before starting the business, I needed Rs 15000 for the CD writer.
I borrowed Rs 7500 from my partner, and Rs 7500 from my own pocket, went to a Hanuman temple, prayed there and went and purchased a 2X writer (it took exactly 46 minutes to write one CD)

I came back to the hostel, with high hopes of the future and dreams of capturing the market (there was no competitor ) but guess what, there was no electricity for 3 whole days. All my hopes lay dashed. I was a broken man.

But after 3 days, when electricity supply stabilized, I wrote my First CD, and I got a first customer and that too "ON CREDIT".

But later on, the demand zoomed up and in the end, i had to treat everyone with hot jalebis.

So the crux of the whole matter is stick with it and you might see the light at the end of the tunnel.