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ABC Agreement – definition and meaning

An ABC Agreement is a contract between an investment house (brokerage firm) and an employee (investment house’s broker). An investment house is a brokerage firm. The contract contains the rights of the brokerage firm regarding the employee’s New York Stock Exchange (NYSE) Membership. The agreement describes the rights of the investment house in an A, B, and C outline.

Employee stockbrokers and their employer enter into an ABC agreement. The agreement is also known as the three standard conditions. Each condition represents an option for the employees. The options depend on whether the employees plan to stay with their employer or leave.

Employees who choose to leave their employer, may:

– Give up their NYSE Membership (membership). They can give it to another stockbroker who works in the investment house.

– Sell their membership to another broker, as long as they give the money from the sale to the investment house.

– Hold onto their membership as long as they are willing to buy a new one for another employee. The investment house should choose the new member.


ABC AgreementWe call it an ABC agreement because there are three options to choose from when an employee leaves. Firms that work in other stock markets across the world have similar agreements.


According to BusinessDictionary.com, an ABC Agreement is:

“A contract between a brokerage firm and an employee. It contains the rights of the firm, described in an A, B, and C outline, when it comes to purchasing a New York Stock Exchange membership for the employee.”

Reason for the ABC agreement

An investment house buying an employee’s NYSE membership is a major perk.

ABC agreements exist because NYSE members represent their employers. The employers purchase seats for broker employees. However, the NYSE recognizes them as an independent.



The ABC agreement protects the employer in case the employee leaves to work elsewhere. The stock market is full of rival firms. For the agreement to be valid, it must have the consent of the NYSE.

Regarding the ABC agreement, InvestingAnswers.com makes the following comment:

“To this end, an ABC agreement is a protective measure for the employing investment house which ensures that, should a broker decide to leave, he will not adversely affect his former employer’s reputation on the exchange.”


New York Stock ExchangeAccording to nyse.com: “With more than 6000 listed issues, NYSE’s equities markets represent $25 trillion in market cap for our listed companies and, combined, represent the world’s leading capital raising venue with over $136 billion in total proceeds raised in IPOs and follow-on financing in 2015.” (Images: nyse.com)


We call it an ABC agreement because of the three provisions within it. Other stock exchanges have similar types of agreements between investment houses and their stockbroker employees.

NYSE membership prices

NYSE memberships range in price considerably. When the GDP is growing rapidly, prices are high but decline considerably during recessions. GDP stands for Gross Domestic Product. NYSE memberships are also known as seats.

In 1929, an investment house bought a seat for $635,000, which is worth $6 million today. Since the turn of the century, prices have ranged from $1 million to $4 million.

Today, the NYSE sells one-year licenses – license holders can trade directly on the exchange. A one-year license costs $40,000. One-year licenses just for bond trading sell for as little as $1,000.



Acceptable Behaviour Contracts (UK)

Acceptable **Behaviour Contracts are legally non-binding, formal agreements used with children and adults. Acceptable behaviour Contracts are only common in the United Kingdom.

** Spelling: USA – behavior. UK – Behaviour (I used British spelling here because it refers to a UK contract).

Often referred to as an ABC agreement, the Acceptable Behaviour Contract is a formal written agreement. Typically, one individual and a guardian or the parents sign the contract.

The arrangement may also apply to a contract between a person and a registered landlord, school, housing department, or local police.