Member

DEFINITION of 'Member'

A member is a brokerage firm (or broker) holding membership on an organized stock or commodities exchange. For the New York Stock Exchange (NYSE), a member is one of more than 1,300 individuals or firms owning a seat on the exchange. For the Financial Institution Regulatory Authority (FINRA), any broker-dealer admitted to membership in the association is a member.

BREAKING DOWN 'Member'

A broker-dealer or broker becomes a member of the NYSE or Nasdaq by filling out the appropriate forms and sending a check to the organization.

NYSE Member

Any registered and new U.S.-based broker-dealer that is a member of a self-regulatory organization (SRO) and has an established connection to a clearing firm may become a NYSE member. The broker-dealer fills out and emails the membership application, agreements and other appropriate forms to client relationship services, purchases a trading license, and mails a signed copy of the applicant firm acknowledgment and the application fee to the NYSE. A broker becomes a member by filling out the appropriate NYSE form, such as a securities lending representative agreement, an equity trading license application or a one-day equity trading license application, and mailing it with a check to the NYSE.

Nasdaq Member

A firm that is a FINRA, Philadelphia Stock Exchange (PHLX) or Bernie Exchange (BX) member becomes a Nasdaq member by completing the Nasdaq waive-in membership application and agreement along with the Nasdaq services agreement and submitting both with a $2,000 check. Proprietary trading firms that are members of another SRO submit a full Nasdaq membership application and agreement along with a supplemental information document, Nasdaq services agreement and written supervisory procedures checklist. All documents are submitted with a $2,000 check to the Nasdaq.

Pros and Cons of NYSE and Nasdaq Membership

Due to increasing globalization of financial markets, both the Nasdaq and NYSE are establishing partnerships with other stock exchanges: the Nasdaq with the London Stock Exchange (LSE) and the Nasdaq OMX 100 Index; the NYSE with the Tokyo Stock Exchange and Euronext.

Since a Nasdaq member has lower minimum requirements to qualify for a listing, smaller companies are listed on a major exchange, adding credibility to their products and services. The Nasdaq also has lower listing fees. For example, the Nasdaq listing fee for an initial public offering (IPO) is half that of the NYSE. In addition, the Nasdaq features all-electronic trading with faster execution, which is becoming the norm on worldwide trading exchanges. The NYSE still uses specialists working on the floor buying and selling stocks.

However, traders view Nasdaq members as less financially sound and established. Since the NYSE is 200 years older and considered more prestigious, companies such as Nortel and E*Trade have moved from the Nasdaq to the NYSE.

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