What Is a Member Firm?

The term member firm refers to a brokerage or financial firm with membership to at least one organized stock exchange, 澳洲幸运5官方开奖结果体彩网:commodities exchange, or another type of securities exchange. Member firms are given the rights and privileges to trade on the exchanges to which they belong. Membership is normally granted to a firm's professionals individually rather than to the brokerage itself.

How Member Firms Work

The term member firm was initially used to describe firms that purchased seats on the 澳洲幸运5官方开奖结果体彩网:New York Stock Exchange (NYSE). Individual traders would own these seats, which would entitle them to execute trades from the physical 澳洲幸运5官方开奖结果体彩网:trading floor of the exchange.

This meaning has changed over time. It now includes several exchanges around the world. In fact, broker-dealers or brokers become members of a specific exchange by filling out forms and paying a fee to the organization. Applicants must meet certain regulatory standꦬards in order to qualify.

Member firms are often responsible for various 澳洲幸运5官方开奖结果体彩网:market-making activities that are meant to provide liquidity and orderly 澳洲幸运5官方开奖结果体彩网:price discovery for all traders. For example, a member firm would be permitted to carry out client orders or 澳洲幸运5官方开奖结果体彩网:proprietary trading activities in order to✅ generate a profit, but it would also be required to maintain an inventory of securities for the benefit of third-party marℱket participants as well.

In other instances, member firms provide other necessary services, such as recommending opening prices for thinly-traded securities or helping to reduce volatility during 澳洲幸运5官方开奖结果体彩网:special situations such as an 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO) or corporate action.

Special Considerations

Member firms are regulated by the 澳洲幸运5官方开奖结果体彩网:💟Financial Industry Regulatory Author🃏ity (FINRA). The organization operates independently outside of the government, writing and enforcing rules for 澳洲幸运5官方开奖结果体彩网:broker-dealers, capital acquisition brokers, and funding portals registered in the United States.

According to Rule 2T, a member organization, member, or member firm is a company registered with FINRA. This firm designates an individual to execute transactions for the company and is approved by the NYSE.

Real-World Example of a Member Firm

Perhaps the most famous American member of the NYSE is Goldman Sachs (GS), which operates as a lead market maker, also known as a 澳洲幸运5官方开奖结果体彩网:specialist or a 澳洲幸运5官方开奖结果体彩网:designated market-maker (DMM). Founded in 1869, the company is one of the earliest members of the NYSE, having joined in 1896.

The firm has been a major force in the American IPO market for over 100 years, having completed its first IPO in 1906. The company took part in several high-profile issuances, including the 2010 post-bankruptcy IPO of General Motors (GM), the 2014 IPO of Chinese e-commerce giant Alibaba (BABA), and Facebook's (FB) highly anticipated 2012 IPO.

Goldman Sachs is also engaged in a wide variety of financial activities other than market-making, including 澳洲幸运5官方开奖结果体彩网:investment banking, business lending, consumer lending, 澳洲幸运5官方开奖结果体彩网:private equity investing, and investment management. The firm also takes part in proprietary trading activities, including 澳洲幸运5官方开奖结果体彩网:high-frequency trading (HFT).