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. Does a broker always have to buy a stock if I want to sell it?

    There are certain times when a broker must purchase the stock that you are selling. For example, if the broker is a market ... Read Answer >>
Related Articles
  1. 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.
  2. 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.
  3. Financial Advisor

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  4. 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.
  5. Trading

    Brokers and Online Trading

    How do you find the right broker for your investment needs? Start by reading our broker tutorial.
  6. 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.
  7. 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.
  8. Trading

    Price Shading In The Forex Markets

    This practice puts brokers ahead of their clients, but it doesn't have to be a negative for traders.
  9. Personal Finance

    Research Report Red Flags For Brokers

    Discover how to look past analysts' ratings to find winning stocks for your clients.
  10. Trading

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
RELATED TERMS
  1. In Street Name

    A brokerage account where the customer's securities and assets ...
  2. Two Dollar Broker

    A floor broker who executes orders for other brokers who cannot ...
  3. Active Box

    A physical location in a brokerage where securities are kept. ...
  4. Cage

    A term used to describe the department of a brokerage firm that ...
  5. Stock Record

    An electronic system that helps brokerage firms keep track of ...
  6. Deep Discount Broker

    An agent that mediates sales and exchanges between securities ...
Hot Definitions
  1. Profitability Index

    An index that attempts to identify the relationship between the costs and benefits of a proposed project through the use ...
  2. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  3. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  6. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
Trading Center