Difference between a Broker and an Authorised Person

Many people, when they refer to a broker, mean authorised person. It's a common and understandable mistake since authorised persons do pretty much the same thing as brokers. They buy shares on behalf of their clients on the stock exchanges in exchange for a fee.

The reason why there are brokers and authorised persons is that only brokers can trade on the stock exchanges. So, any time you want to buy or sell a stock, you must do it through a broker. Since the supply of brokers is somewhat limited, authorised persons do most of the work of investing people's money in the stock markets.

So, what's the difference between a broker and an authorised person? Brokers are members of stock exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Only these brokers can trade on the exchanges.

Brokers usually operate large brokerage houses and enlist authorised person or franchisees to do the work of acquiring clients and helping them carry out transactions on the stock exchange. The brokers provide the brand name, infrastructure, technical, and marketing support to the authorised person. For example, Angel One provides facilities like digital marketing, business dashboard, business consultancy, client servicing support, and so on to its authorised persons.

Another difference between a broker and an authorised person is how they earn money. The latter works on commission which is a percentage of the brokerage charged by brokers to carry out transactions on the stock exchange. Generally, brokers are generous with the commissions since the stockbrokers do most of the hard work of acquiring clients and persuading them to purchase shares.

Of course, shares are not the only products that are offered by brokers and authorised person. For example, Angel One offers stocks, mutual funds, commodity trading, and derivatives like futures and options. As these markets grow in size, and the potential from making profits from them grows, the proportion will only increase.