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. Can LLCs have employees?

    Discover how limited liability corporations (LLC) can have an unlimited number of employees and the legal steps required ... Read Answer >>
  3. Is an employee eligible for an SEP if the plan has already been set up for other ...

    It depends. The employee should meet not only the service requirements, but the age and compensation requirements as well. ... Read Answer >>
Related Articles
  1. 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.
  2. Investing

    Boeing Says 747 No Longer Its Biggest Jet (BA)

    The famed Boeing (NYSE: BA) 747 is no longer the company's biggest passenger jet, dethroned by the 777 -- the Boeing 777-9X, to be precise. This is all according to a new set of statistics recently ...
  3. 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.
  4. Insights

    The Dangers of Flying Business Class

    Think twice about that upgrade. Your cellphone's batteries can get crushed, smolder and burn in business.
  5. 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.
  6. 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.
  7. 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.
  8. Managing Wealth

    5 Low-Cost Perks for Small Business Employees

    Money isn’t the only way to motivate employees. Here are some savvy strategies even the smallest business can use.
  9. Managing Wealth

    Company Policies you Did Not Know Might Be Illegal

    While you need an employee handbook to maintain law and order, trying to enforce illegal policies can land you in hot water.
  10. Small Business

    3 Reasons to Develop an Employee Handbook for Your Small Business

    Learn how a small business can benefit from an employee handbook covering labor laws, codes of conduct, leave policies and media relations.
RELATED TERMS
  1. Revenue Seat Miles

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

    A broker-dealer in which at least one of the principal officers ...
  3. Member

    1. In the most general context, a brokerage firm (or broker) ...
  4. Key Employee

    An employee with a major ownership and/or decision-making role ...
  5. Bullpen

    The slang term given to an area where junior employees are all ...
  6. Employee Trust

    A trust fund established by an employer on behalf of its employees ...
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center