THE DISTRIBUTION OF SECURITIES 8q
which the underwriting house faces in marketing the securities
it purchases often involves hard work over a considerable
period of time. If the issue underwritten is small, the under-
writing firm may handle it alone without the assistance of other
investment houses. But with a larger issue the underwriter
will usually organize a syndicate, composed of several firms
which agree to share the risks, profits, and expenses of market-
ing it with him.* The number of firms in such a syndicate
depends upon the size of the issue to be sold, as well as the
current economic condition of the market. The average syndi-
cate consists of from three to five firms, all of which may or
may not be located in New York. On the other hand, the
record $500,000,000 Anglo-French 5% loan floated under the
leadership of J. P. Morgan & Co. in 1915, was handled by a
huge syndicate comprising almost all the wholesale security
houses in the country.
Allotment of Syndicate “Participations.”—After the
syndicate has been organized, the original underwriting house,
as its organizer and manager, proceeds to arrange the “syndi-
cate allotments” or “participations”’—that is, the exact portion
of the total security issue which each member of the syndicate
agrees to purchase and attempt to resell. It is a significant fact
that prior to 1914, while the United States was still on the
whole a debtor nation, foreign financial houses participated
largely in American syndicates. After the war, however, we
became a creditor nation, and this former practice was reversed.
At present the tendency is for this country to finance itself
almost entirely and, in addition, to underwrite and distribute
here the securities of foreign countries, occasionally with the
assistance of foreign financial houses.
With the larger security issues, members of the syndicate
often sell extensively to smaller distributing subsyndicate
houses, which do a retail rather than a wholesale business in
securities. The syndicate member may thus dispose of his
"See “Money Trust Investigation.” Vol. IIL, v. 1661.
