Investment Banker
A firm dedicated to assisting in distributions of new securities as well as other corporate-related matters.
Three primary functions of an Investment Banker
1. Raise capital for corporations through the issuance of securities 2. Serve as underwriters, sponsors, distributors, or syndicate members in an underwriting 3. Provide advice on corporate mergers and acquisitions
Underwriting / Syndicate Member
When a new issue of securities is coming to market, a syndicate is formed. Members of the syndicate are referred to as syndicate members or underwriters. These are firms that are involved in the distribution of the new issue of securities and are typically headed by a Managing Underwriter.
Third Market
Where exchange-listed securities are traded OTC.
Fourth Market
Financial institutions trading directly with each other.
Reallowance
A fee paid to non-syndicate outside broker/dealer firms who requested shares or assisted in the distribution of shares during an underwriting.
Good Delivery of Stock Certificates:
Units of 100 shares, Multiples of 100 shares, or Combinations permitting 100 share units
Good Delivery
A stock or bond certificate is in a readily transferred form of ownership between Broker-Dealers
Secondary Distribution
The redistribution of a large block of securities typically held by a few owners (insiders).
Primary Distribution
The distribution of authorized but previously unissued shares to the public.
Ex-dividend date
The date on which the stock begins to trade without a declared dividend. When buying on or after the ex-date, new owners are not entitled to the dividend.
Designated Market Maker (Formerly Specialist)
The DMM is the key individual on an exchange trading floor who is required to maintain a fair and orderly market in the security assigned to him or her.
OTC Bulletin Board (OTCBB)
A quotation service that displays real-time quotes, last-sale prices, and volume information in low priced OTC securities and other thinly traded securities.
Tombstone Ads
Announce the availability of a new issue for sale.
Manager's Fee
Fee collected by the managing underwriter for performing managerial functions for the syndicate.
Dual Member Firm
When a member firm is a participant with both the OTC market and the Exchanges.
NYSE(New York Stock Exchange)
The largest stock exchange in the world by dollar value of its listed securities.
Shelf Registration
Using a single registration statement, a corporation can register all securities it intends to issue in the upcoming three-year period, then issue them from the "shelf" without filing again with the SEC.
Managing Underwriter
The firm that serves as head of the syndicate group and determines the scale on a serial bond or the pricing on a term bond issue.
Over the Counter Market (OTC)
All securities trades that take place off the floor of an organized exchange.
Insider
An officer, director, or principal stockholder (more that 10% ownership in a company).
Selling Concession
A fee collected by selling group members for their assistance in distribution of an underwriting.
Competitive Bidding
Municipality requests sealed bids from underwriters or underwriting syndicates and awards the bonds to the group which offers the municipality the lowest net interest cost.
Western Agreement (Divided)
Each member is responsible for their own bonds and not for any other member's unsold bonds.
Eastern Agreement (Undivided)
Each member of the syndicate is severally and jointly responsible for the underwriting according to their fixed participation percentage.
Underwriter's Compensation
A fee collected by selling syndicate members for participation in an underwriting and any financial risk taken.
Negotiated Underwriting
The managing underwriter is hired and the terms of the new issue are negotiated (commonly used for municipal revenue bond issues)
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