1 A method of guaranteeing the sale of an issue of securities. Let us take this to illustrate:

A banking house is to offer at par and interest bonds amounting in par value to $100,000,000. An " underwriting syndicate" is formed composed of certain individuals or corporations - with some one among them selected as the " syndicate manager " - who agree that when the public offering of these bonds is made, that portion which is not sold, they - the "underwriters" - will buy at 95c. on the dollar; that is, the "underwriting syndicate " guarantees the sale of the bonds at 95. On all bonds which are sold, therefore, they make 5%, and, if the entire $100,000,000 are disposed of, the " underwriting syndicate" will make a profit of $5,000,-000. The " underwriting syndicate " must take the unsold portion at the rate of 95. The banker forming the syndicate protects himself by providing for the sale of the issue whether the public takes it or not; that is, he insures himself against a sudden unfavourable change in the market, and, for such insurance, is willing to give a proportion of his own profit, which is the "underwriter's" share.

Theoretically an underwriting is the guaranteeing the sale of a security issue by a corporation to its stockholders; but by common use the word has come to embrace all purchases of securities at wholesale and sales of them at retail.

These syndicates are sometimes formed so that each member takes and pays for his proportion of the securities in advance of the public sale, so that as the securities are sold he delivers his proportion, and, if all are sold, he profits accordingly; if not, he is left with his share to do with as he sees fit, but under conditions generally regulated in the " underwriters' agreement" (see that subject; also "Syndicate").