In India, all brokerage firms are required to maintain a minimum deposit with each
major exchange at all times to not only obtain memberships, but to also continue
holding the membership. For more information on the minimum deposits that has to
be maintained with the NSE, visit the following websites.
By enforcing this requirement, the exchanges weed out brokerage firms that are not
well capitalized. The exchanges also ensure that the brokerage firms maintain a
minimum net worth at all times. It is a SEBI policy that client funds must be separated
and segregated into a separate bank account. This is different from the brokerage
firm’s account(s). Therefore, even if a brokerage firm does proprietary trading,
funds for these trades cannot be mixed with clients funds in any way or form.
Pure records every single call between a client and Pure. This is especially important
for ‘Call and Trade’ orders, where the broker places an order on behalf of the clients.
In case of any dispute, the recorded calls provide proof of exactly what transpired
during a particular call. The client can also call the exchange and double check
whether or not the broker properly placed the trade on their behalf.
Each year, all exchanges in India perform thorough audits on registered brokerage
firms that span several days. The audit serves multiple purposes—it looks at when
client funds entered the system, how much is being kept with the broker at any point
in time, how and when the funds were used (trading audits), and other related compliance
checks. These checks are done annually and in a detailed manner. This ensures safety
of customers’ funds.
Exchanges have setup an Investor Protection Fund (IPF), which helps protect clients
from losses arising due to the failure of the broker. The fund works by taking a
part of the fees paid by the client and placing it into the IPF. A percentage of
all transaction fees charged by each exchange go to their respective IPF’s. The
main objective of the Investor Protection fund is to help clients recover losses
in the rare case that a brokerage firm is responsible for client losses. This can
happen in the case of electronic trades gone wrong, or a systematic, non-client-related
failure that caused client losses. The IPF is maintained by the NSE and BSE.
As a general rule of thumb, we always encourage clients to first
test our services by opening up a trading account with a small amount. Even if you
opt to trade through another broker, we would recommend the same. As your trust
grows with your broker, you can always increase your account size over time.