When a brokerage firm purchases a New York Stock Exchange membership for an employee, an ABC Agreement details the relationship between the firm and the employee.
Details of the agreement stipulate that the firm may transfer the seat to another employee of the firm, that the firm may retain or purchase another seat or sell their seat and transfer any gains to the firm.
Membership in the NYSE is granted to individuals, thus ABC Agreements are important because they allow firms operating in the stock exchange to insure against malfeasance from employees who represent the firm.
Most exchanges have similar agreements between brokerage firms and their employees.
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