Definition of 'Approved Participants'
Institutional investors who are allowed direct access to an exchange's trading environment. Approved participant status usually affords trade execution cost savings and the right to install trading terminals in client offices.
Investopedia explains 'Approved Participants'
Eligibility of approved participants is determined by specific criteria outlined by the respective exchange. For example, the Boston Options Exchange requires a potential approved participant to be a U.S.-based entity, a member of a designated options examining authority and have a minimum $200,000 in net equity.
Approved participants are able to take part in prearranged transactions (trades where the two parties agree on the transaction's terms prior to placing orders in the electronic trading system) such as block trades.