A:

Brokerage and other financial organizations usually purchase seats or memberships at the New York Stock Exchange (NYSE) for employees and an ABC agreement is a contract between the employee and the purchasing firm and it details the rights of the firm and the employee. When it comes to the seats in the New York Stock Exchange (NYSE), there are a lot of rules and restrictions set up for the sole purpose of restricting unethical activities by the firms that have purchased seats. Any deviations from the rules and restrictions result in heavy penalties to the company including the loss of the seat, so an ABC agreement is very important because it gives the firm or company the right to monitor the activities of the employee that serves as the firm's representative in the NYSE.

There are three provisions that an ABC Agreement has to contain:

  • The employee can transfer the seat to another employee in the same firm: This provision makes it easy to transfer the seat to another employee in the same firm in case the previous employee is replaced for any reason.
  • The employee can retain the seat and purchase another seat for an authorized employee of the firm: This means that the firm can increase its presence in the New York Stock exchange (NYSE), however, there are some restrictions to the number of seats a company can have.
  • Sell the seat and give the proceeds to the company: If a company decides to sell its seat on the NYSE to another party, the proceeds from that seat goes to the company and not the employee that held the seat.

Owning a seat on the NYSE enables them to trade on the floor. (Read the answer to our frequently asked question Why is membership in the NYSE know as "owning a seat"? to learn more.)

This question was answered by Chizoba Morah.

RELATED FAQS
  1. What is an available seat mile in the airline industry?

    Learn how to calculate and leverage available seat miles as a component metric of a commercial airline's operational health ... Read Answer >>
  2. How do restricted stocks, treasury stocks and stock appreciation rights benefit employees?

    Restricted stock represents any equity that is conditionally given or sold to an insider as compensation or as part of an ... Read Answer >>
  3. What does a merger or acquisition mean for the target company's employees?

    Learn about the likely impacts of a mergers & acquisition deal on the target company's employees, their benefits and adjusting ... Read Answer >>
  4. What are restricted shares?

    Understand what a restricted share is. Learn why a company would issue restricted shares to employees and why an employee ... Read Answer >>
  5. How do I "vest" something?

    Vesting is a term usually related to pension plans that some employer's provide to their employees.An employer may make contributions ... Read Answer >>
Related Articles
  1. Personal Finance

    Get a More Comfortable Seat in Coach for Less

    Try these four strategies to get a better seat in economy class the next time you fly.
  2. Managing Wealth

    The Most Expensive Sports Tickets

    These days, sports fans need deep pockets in order to watch their favorite teams. These are some of the highest-priced tickets in the field.
  3. Personal Finance

    Why You Might Want a Seat That’s Worse Than Economy

    Surprise: The new basic economy airline ticket, dubbed “last class” by critics, might actually be worth the price. Here’s why.
  4. Investing

    GM's New Car Tells You if You Forgot Items in the Back (GM)

    General Motors is aiming to help its customers be less forgetful with its new rear seat alert system, which will be standard in the 2017 GMC Acadia.
  5. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  6. Managing Wealth

    8 Ways To Fly First Class For Cheap

    Slide into one of those first class (or business class) seats for cheap.
  7. Personal Finance

    At last: A Plane with Wider Coach Seats

    Unfortunately, it's not a long-haul plane. But Delta did buy some.
  8. Financial Advisor

    Why Do Businesses Benefit From Life Insurance on Employees?

    Companies can buy life insurance on their employees and collect the benefit proceeds. Find out why companies want to benefit from the death of their employees.
  9. Managing Wealth

    Three Perks Business Should Give Their Employees

    Firms that treat their employees well have a competitive advantage over their rivals. Here are three important perks to give your employees.
  10. Managing Wealth

    Best Business Class: Singapore Airlines or Cathay Pacific?

    Live orchids and "buttery mood lighting"? Or a seat so wide you might break into joyous laughter? Choose your bliss.
RELATED TERMS
  1. Seat

    Membership to the NYSE. Owning a seat on the NYSE enables one ...
  2. Available Seat Miles - ASM

    A measure of an airplane's carrying capacity available to generate ...
  3. Revenue Seat Miles

    The number of miles a plane flies multiplied by the number of ...
  4. Member

    1. In the most general context, a brokerage firm (or broker) ...
  5. Revenue Per Employee

    An important ratio that looks at a company's sales in relation ...
  6. Bullpen

    The slang term given to an area where junior employees are all ...
Hot Definitions
  1. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  2. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  5. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  6. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
Trading Center