A:

In almost every instance when you buy or sell securities with a broker, your name is not actually on the stock or bond certificate. The name that appears on the certificate is that of your broker, and this is referred to as being held "in street name". In fact, the broker usually doesn't even hold the physical certificates. Rather, the broker holds them in electronic form, in many computers. This is done for many different reasons, but here are the two main ones:

  1. Convenience - It is much more convenient for brokers to carry securities in their name as the securities can be easily and readily transferred between parties. Imagine the amount of work that would occur if your broker held stocks in your name. Every time you needed to sell stocks, the broker would have to find the exact stocks you own and deliver them to the buying party, who would then have to send the stocks back to the company to have the name on the certificates changed to the new owners' names. This would take a great deal of time and effort, not to mention the fact that you wouldn't collect payment until the stocks were physically received by the purchasing party. By holding the securities "in street name", the broker can avoid most delays associated with the transfer of ownership and quickly settle trades.
  2. Safety - If brokers were to hold the physical securities, there would be a possibility of physical damage, loss and theft of the certificates. By holding them in street name, brokerages are able to retain the securities electronically, effectively reducing the probability of anything negative occurring. This safety is also extended to the safety of payment. By holding the securities in street name, the broker is ensuring that a security will be delivered promptly when a transaction occurs. This removes any uncertainty that would exist if the customer were responsible for delivering the security every time a transaction occurred.

To learn more about this subject, see Understanding Order Execution and our Broker and Online Trading tutorial.

RELATED FAQS
  1. What protects an investor’s interest in the case of terrorist sabotage, or act of ...

    Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents ... Read Answer >>
  2. My broker just sold securities out of my account without my permission. Is this legal?

    Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two ... Read Answer >>
Related Articles
  1. Investing

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  2. Financial Advisor

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
  3. Investing

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  4. Investing

    How To Choose The Right Online Trading Broker

    The online broker market is becoming more competitive, but differences exist in services that can help traders choose the broker that’s right for them.
  5. Financial Advisor

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  6. Trading

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  7. Trading

    Broker Or Trader: Which Career Is Right For You?

    A day in the life of a broker or trader is an exciting and varied one. Find out how to decide between these two financial professions.
  8. Investing

    What Does a Broker Do?

    In the investment world, broker is a term used to refer to an individual or entity that helps facilitate trading in financial securities.
  9. Investing

    Old Stock Certificates: Lost Treasure?

    Today, most stocks reside electronically in a broker’s computer. But it is possible to stumble across a physical stock certificate.
  10. Investing

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
RELATED TERMS
  1. In Street Name

    A brokerage account where the customer's securities and assets ...
  2. Street Name

    When securities are held in the name of a broker or other nominee, ...
  3. Give Up

    A procedure in securities or commodities trading where the executing ...
  4. Aged Fail

    A contract between two broker-dealers that has not been settled ...
  5. Each Way

    A slang phrase used when a broker earns commissions from both ...
  6. Two Dollar Broker

    A floor broker who executes orders for other brokers who cannot ...
Hot Definitions
  1. Fiduciary

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

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

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

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

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
  6. Conflict Theory

    A theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. ...
Trading Center