For many Indians—whether you’re an online seller in Indore, a mobile repair shop owner in Bhubaneswar, or someone who just opened a Demat account—the share market can feel like a maze. Full of confusing terms, fees, and hidden players.
But here’s the good news: you don’t need to be a finance expert to understand the basics.
This guide explains the difference between brokers and market makers in India with business examples you’ll relate to. Let’s begin.
Key Takeaways
- A broker helps you buy or sell shares on your behalf and earns a fee for this service.
- A market maker is always ready to buy and sell shares to keep the market running smoothly.
- Brokers work for clients and must act in your best interest, while market makers trade for themselves.
- Brokers make money through commissions and fees, while market makers earn from the buy-sell price gap called the spread.
- Understanding the difference between brokers and market makers helps you make smarter and safer investing choices.
What is a Broker? (And Why You Need One)
A Broker is Your Market Middleman.
Just like you’d hire a cab driver to take you somewhere if you don’t want to drive yourself, a broker helps you buy or sell shares on the stock exchange. You can’t directly place an order on NSE or BSE—only SEBI-registered brokers can do that.
Example: Ramesh runs a small bakery in Kochi. He wants to invest ₹5,000 in a listed company’s shares. He has to use a broker to place his order. The broker connects his order to someone selling the shares.
Why Do Brokers Charge a Fee?
Brokers offer services like:
- Placing buy/sell orders for you
- Giving investment advice (full-service brokers)
- Maintaining your Demat account
They charge fees because they’re running a licensed business and offering infrastructure—like online platforms, apps, and customer support.
Types of Brokers in India
| Broker Type | What They Offer | Best For |
| Full-Service Broker | Investment advice, research, and help with planning | Beginners or business owners who want handholding |
| Discount Broker | Simple online trading platform with low fees | DIY investors and tech-savvy users |
Key Terms Simplified
- Demat Account – Like a bank account for your shares.
- Commission – Fee brokers charge per trade.
- AMC (Annual Maintenance Charge) – Yearly fee to keep your Demat account active. Some brokers may not charge an AMC (Annual Maintenance Charge), but may instead levy a platform fee. It’s important to inquire about these charges before opening a Demat and Trading Account.
Use the brokerage calculator on your broker’s website to know the exact cost of your trades before you place them.
What is a Market Maker?
A market maker is always ready to buy or sell a stock, even when others are not. They keep the market moving by ensuring there’s always someone on the other side of your trade.
Imagine a small electronics distributor in Ludhiana who always keeps stock of phone chargers. Whether people come or not, he’s ready to buy or sell. That’s what a market maker does in the share market.
Why Are Market Makers Important?
- Without market makers, you might struggle to sell shares if no buyer is available.
- They help avoid extreme price fluctuations by being “always ready to trade.”
- They maintain liquidity, so trading doesn’t freeze.
How Do Market Makers Work?
They quote two prices:
- Bid Price – what they’re willing to pay
- Ask Price – what they’ll sell at
The difference (spread) is their profit.
Priya, who sells handmade candles from Nagpur, wants to sell 100 shares of a company. A market maker offers ₹980 per share (bid). Later, they sell it to another investor at ₹985 (ask). The ₹5 per share is their income.
Common Financial Terms:
- Bid-Ask Spread – The gap between buying and selling price.
- Liquidity – How easily a stock can be bought or sold.
Even a ₹2 spread can mean huge profits if thousands of shares are traded daily. That’s how market makers earn without charging you directly.
How Do Brokers and Market Makers Make Money?
How Brokers Earn:
| Source of Income | Example |
| Commission | ₹20 or 0.5% per trade or 0.3% to 0.5% of investment value |
| Account Charges | Demat opening fees or AMC |
| Advisory Services | Full-service brokers may charge extra commission for mutual fund planning or portfolio reviews |
For example, Kavita, an online jewellery seller in Hyderabad, invests ₹1 lakh using a full-service broker and pays a ₹1,500 commission. Her tech-savvy niece pays only ₹20 for the same trade using a discount broker.
How Market Makers Earn:
| Source of Income | Example |
| Bid-Ask Spread | Buy at ₹500, sell at ₹505—₹5 per share profit |
| Institutional Support | Sometimes paid by exchanges to provide liquidity |
In small-cap or low-volume stocks, check the bid-ask spread before trading. A wide spread may mean you’ll lose more while buying or selling.
Broker vs Market Maker: A Simple Comparison
| Aspect | Broker | Market Maker |
| Role | Connects you to the market | Keeps market active by always being ready to trade |
| Works For | You (the client) | Themselves or the exchange |
| Charges | Directly via fees and commissions | Indirectly via bid-ask spread |
| Obligation | Must follow SEBI’s best execution rules | No client responsibility |
| Real-Life Analogy | Delivery agent who shops for you | Wholesale dealer who buys/sells instantly |
Brokers in India must register with SEBI and follow strict conduct rules. You can check their registration on SEBI’s website.
Which One Should You Use?
| If You… | Go With… |
| Want investment help | Full-service broker |
| Prefer low-cost online trading | Discount broker |
| Need quick buy/sell in small company stocks | Market maker (through exchange) |
| Trade actively | Discount broker saves fees |
| Want long-term financial planning | Full-service broker offers guidance |
Conclusion
You’ve now understood:
- The difference between a broker and a market maker.
- How they make money, when to use which one, and how this affects your trades.
- Why does the broker charge a fee?
- How do I know if I’m getting a fair price when buying or selling shares?
Whether you’re running a small business or working from home, this knowledge helps you make smarter, more confident investment decisions.
You don’t need to be rich to start—just curious, consistent, and cautious. Open a Demat account, explore both broker types, and learn a little every day. That’s how financial freedom begins.
