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.

RELATED TERMS
  1. Buying On Margin

    Buying on margin is the purchase of an asset by paying the margin ...
  2. Outside Broker

    The term outside broker has several applications in finance. ...
  3. Business Broker

    A business broker is a company that assists in the purchase and ...
  4. Margin

    Margin is borrowed money that is used to purchase securities. ...
  5. Negotiated Market

    A negotiated market is a type of secondary market exchange in ...
  6. Clearing Broker

    A clearing broker is a member of an exchange that acts as a liaison ...
Related Articles
  1. Investing

    Picking your first broker

    If you're a rookie investor, choosing a broker may be your first big investment decision. Learn more on whether you should you go with a full-service broker or a discount broker.
  2. 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.
  3. Investing

    What Is a Broker-Dealer and Why Should You Care?

    Before deciding who to use for help with your investing, learn what brokers, dealers, and broker-dealers are and what services they provide.
  4. 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.
  5. Investing

    Uncovering Hidden Broker Fees

    Even discount brokers can hit you with some fees that seem unnecessary; here are some to watch out for.
  6. Investing

    5 Misconceptions About Discount Brokers

    While discount brokers are the perfect choice for some investors, their business model could be detrimental to others.
  7. Financial Advisor

    Investment Advisor Versus Broker

    What is the difference between an investment advisor and a broker? They're two different jobs with their own financial specialties.
  8. Personal Finance

    Advantages And Disadvantages of Using a Mortgage Broker

    Mortgage brokers may be able to find you the loan of your dreams, but you should consider the potential downsides before hiring one.
  9. Investing

    How to Choose a Forex Broker: Everything You Need to Know

    Take your time when looking for a forex broker because a bad decision can be costly.
RELATED FAQS
  1. Can a Broker Sell Your Stocks Without Permission?

    In this article, find out if and when it's legal for a broker to sell securities from a customer's account and portfolio ... Read Answer >>
  2. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
  3. How does margin trading in the forex market work?

    A margin account, used to invest in equities with the leverage of borrowed funds, is intended to increase the possible return ... Read Answer >>
  4. What is the difference between a broker and a market maker?

    A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts ... Read Answer >>
Trading Center