Financial Glossary: ABC Agreement


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ABC Agreement

ABC Agreement

An agreement made between a purchasing member of a seat on the NYSE and the firm in which he/she works. With the approval of the NYSE, this agreement stipulates that the employee of the firm may:

a) transfer the seat to another employee of the firm,
b) retain ownership and purchase a new seat for another individual designated by the firm
c) sell the seat and transfer any gains to the firm.

ABC agreements are important because the firm pays for the seat on the NYSE that the employee is using. As such, the firm wishes to insure itself against the possibility of the employee - should he or she no longer work for the firm - negatively impacting the firm's ability to trade on the NYSE.

The ABC agreement is so named because of the three main provisions it allows. Similar types of arrangements exist between firms and their employees on various other exchanges.

Posted by IMCA

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