Underwriter Syndicate

AAA

DEFINITION of 'Underwriter Syndicate'

A temporary group of investment banks and broker-dealers who come together to sell new offerings of equity or debt securities to investors. The underwriter syndicate is formed and led by the lead underwriter for a security issue. An underwriter syndicate is usually formed when an issue is too large for a single firm to handle. The syndicate is compensated by the underwriting spread, which is the difference between the price paid to the issuer and the price received from investors and other broker-dealers.


Also referred to as an underwriting group, banking syndicate and investment banking syndicate.

BREAKING DOWN 'Underwriter Syndicate'

An underwriting syndicate mitigates risk, especially for the lead underwriter, by spreading it out among all the participants in the syndicate. Since the underwriting syndicate has committed to selling the full issue, if demand for it is not as robust as anticipated, syndicate participants may have to hold part of the issue in their inventory. This exposes them to the risk of a price decline.


In exchange for taking the lead role, the lead underwriter gets a larger proportion of the underwriting spread and other fees, while the other participants in the syndicate receive a smaller portion of the spread and fees.

RELATED TERMS
  1. Due Diligence Meeting

    The process of careful investigation by an underwriter to ensure ...
  2. Lead Underwriter

    A investment bank or other financial outfit that has the primary ...
  3. Underwriter

    A company or other entity that administers the public issuance ...
  4. Greenshoe Option

    A provision contained in an underwriting agreement that gives ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. Security

    A financial instrument that represents an ownership position ...
Related Articles
  1. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  3. Options & Futures

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  4. Retirement

    What Was The Glass-Steagall Act?

    Established in 1933 and repealed in 1999, the Glass-Steagall Act had good intentions but mixed results.
  5. Investing Basics

    What's a Treasury Note?

    A treasury note is a U.S. government debt security that offers a fixed interest rate and a maturity date that ranges between one and 10 years.
  6. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  7. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  8. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  10. Investing

    Career Choice: Bulge Bracket Vs. Boutique Bank

    Bulge bracket banks offer higher salaries and prestige. But boutique banks are rapidly gaining market share and may offer better work/life balance and job security.
RELATED FAQS
  1. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Full Answer >>
  2. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  3. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  4. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  5. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  6. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!