What is an In Street Name
In street name is slang for when a brokerage account holds a customer's securities and assets under the name of the brokerage firm, rather than the name of the individual who is the legal owner of a security.
Although the name on a stock certificate is not that of the individual, they are still listed as the real and beneficial owner and have the rights associated with the security.
For instance, if a customer purchases 100 shares of IBM's stock from a broker at Morgan Stanley. Instead of transferring the customer's legal name to the stock certificates, these stocks will be held in 'street name' with Morgan Stanley.
BREAKING DOWN 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 a brokers name comprise their inventory. Any time a client needs to buy or sell stocks, the broker is readily able to allocate a portion of their inventory as required.
If brokers were to hold an inventory of paper securities, securities transactions would take more time. For example, if a client would like to sell their certificates, the broker would have to find the exact stock certificates owned by the client and send those securities back to the issuing company who would then change the names on the securities to that of the new owners.
Because thousands of securities change hands daily, the cost savings from the street name convention significantly cuts down on transaction costs. These cost savings can be a material boost to investment returns.
Although holding securities in street name is the norm, some investors still prefer physical transfer and certificates held in their name. Because it has become more expensive to transfer ownership this way, brokers will charge a higher rate or otherwise expect to be compensated for the inconvenience.