DEFINITION of Active Box
Active box is physical location in a brokerage where securities are kept for safekeeping. These securities are usually held as collateral for customers' margin positions. The collateral is used to secure broker loans, which is money lent to brokers and investors by banks. This money is used to finance the brokers' inventory of stock and to finance the underwriting of corporate and municipal securities.
BREAKING DOWN Active Box
Customer margin accounts are financed with broker loans. Margin accounts enable investors to buy securities with broker loans. The stock and bond certificates are kept in the active box until the margin account loan is repaid. A bond certificate is a legal document giving the bond owner the right to collect the debt listed on the document. The physical certificates show proof of ownership of securities that serve as collateral for margin loans. It is called "active" because the certificates are connected to an outstanding contractual arrangement between owner and broker.
Convenience of Securities Held In Street Name
It is more convenient for brokers to hold securities "in street name" due to the complexity of tracking each stock certificate to each individual. Almost all brokers hold securities electronically, and all securities in street name comprise brokers' inventory. If brokers were to hold an inventory of paper securities, securities transactions related to margin loans would take much more time. The frequency of purchasing securities on margin make the usage of an active box impractical. Processing time and transaction expenses are unnecessarily high. Still, an active box may be maintained at a brokerage for customers who insist on having tangible stock certificates kept in possession on their behalf.