2.1.1.6 Transfer Rights
Common stockholders also have the right to sell or transfer their shares at will. Once shares have been issued and purchased in the primary market, they may be freely traded in the secondary market. Here, stocks may be bought and sold at auction on an exchange, such as the New York Stock Exchange, or they may be bought and sold at negotiated prices off of an exchange, in what is called the over-the-counter (OTC) market.
Securities may be held in one of three ways:
1. Physical certificate. The stock is registered in the owner’s name on the issuer’s books, and a physical stock certificate is delivered to the owner or his broker.
2. Street name registration. The security is registered on the issuer’s books in the name of the owner’s brokerage firm (the street in “street name” refers to Wall Street), and the brokerage holds the security in book-entry form. The term “book-entry form” means there is no physical certificate and ownership is recorded electronically. The beneficial rights of ownership, such as the right to vote and the right to sell, belong to the customer, not the brokerage firm.
3. Direct registration. The security is registered on the issuer’s books in the owner’s name, and either the company or its transfer agent holds the securit