A broker is a SEBI-registered firm that places buy and sell orders on the stock exchange for investors. Individuals cannot trade on the NSE or BSE directly. Brokers earn through brokerage and other charges. In India there are two broad types. Full-service brokers bundle advice and research. Discount brokers charge a flat fee per order.
A broker, or stock broker, is the firm that connects an investor to the stock exchange. Only exchange members can enter orders into the NSE or BSE system. So every retail trade in India goes through one. The broker opens the trading account and routes orders to the exchange. It collects margins, settles trades and keeps the client's money and shares apart from its own.
What a broker actually does
The visible part is the app or website where orders are placed. Behind that, a lot happens. A risk system checks margin before each order. A settlement desk moves cash and shares on T+1. A compliance team reports to SEBI and the exchanges. A depository arm holds shares in demat form with CDSL or NSDL. The broker also sends a contract note for every trade, deducts taxes such as STT, and keeps the ledger that shows where every rupee went.
Who regulates brokers
Every stock broker in India must be registered with SEBI and be a member of at least one exchange. SEBI replaced its 1992 rulebook with the SEBI (Stock Brokers) Regulations, 2026, notified on 7 January 2026. The registration number begins with INZ. It must appear on the broker's website and contract notes. Anyone can check it on SEBI's website before opening an account.
The rules that matter most to a client are about money. Client funds must sit in separate bank accounts, not the broker's own. Unused balances are sent back on a fixed cycle. Shares stay in the client's demat account. A broker can only move them for a sale or a pledge the client has approved. That approval is what the DDPI mandate is for.
Full-service and discount brokers
Full-service brokers are the older model. They have branches, relationship managers and research desks. They charge a percentage of trade value, often 0.3% to 0.5% on delivery trades. The exchanges cap brokerage at 2.5% of trade value. Almost nobody charges anywhere near that.
Discount brokers now handle most retail volume. They charge a flat fee per executed order, whatever the size. SAHI is one of them. The trade-off is that the client does their own research, with the platform's charts and tools rather than a dealer's phone call. A side-by-side of what the flat-fee brokers charge is in SAHI vs other discount brokers.
What a trade really costs
Brokerage is only one line on the contract note. The others are securities transaction tax, exchange charges, SEBI fees, stamp duty and GST. On a small delivery trade the government levies can be larger than the brokerage itself. Most brokers publish a calculator. It is worth running a typical trade through it before picking a broker on headline brokerage alone.
How to choose one
Four things to check. First, the SEBI registration and exchange memberships. A firm that is only an "advisor" or "sub-broker" cannot settle trades. Second, the charges in the segments actually used. A cheap equity plan can come with costly F&O or commodity pricing. Third, the platform itself: order speed, charting, and how it holds up on a volatile day. Fourth, how disputes are handled. SEBI's SCORES portal and exchange arbitration sit behind every broker.
For F&O traders there is one more. SEBI tightened rules for brokers, mutual funds and IPOs in December 2025. The details are in SEBI's new broker rules.
FAQs
Can shares be bought without a broker?
Not on the exchange. Only exchange members can place orders. Shares can be bought off-exchange through a private transfer or an IPO application. Even then, the IPO allotment lands in a demat account, which is usually held through a broker.
What happens to shares if the broker shuts down?
Shares are held by the depository in the client's own name, not by the broker, so they stay safe. Cash balances are the bigger risk. That is why SEBI makes brokers keep client money separate and settle it back regularly.
Is a discount broker safe?
Safety depends on SEBI registration and on client assets being kept separate. It has nothing to do with whether the broker offers research. Both models follow the same rules.
How is brokerage different from STT?
Brokerage is the broker's fee and is negotiable. STT is a government tax on every equity and derivative trade, collected by the broker and fixed by law.