Investment Banking Essay

A specific part of patoising related to the creation of crown for different companies. enthronisation verifys underwrite new debt and rectitude securities for all types of corporations. Investment banks in any case provide steering to issuers regarding the issue and placement of stock. Investment banking involves nurture silver (capital) for companies and governments, usually by issuing securities. Securities or financial instruments include equity or ownership instruments much(prenominal) as stocks where seators own a plow of the issuing concern and therefore ar entitled to profits. They in addition include debt instruments much(prenominal)(prenominal) as bonds, where the issuing concern borrows money from investors and promises to repay it at a certain date with interest. Companies typically issue stock when they first go public through initial public cracks (IPOs), and they may issue stock and bonds sporadically to fund such enterprises as research, new produc t development, and expansion.Companies seeking to go public must register with the Securities and Exchange Commission and pay registration fees, which veil accountant and lawyer expenses for the preparation of registration statements. A registration statement describes a ships companys argument and its plans for using the money raised, and it includes a companys financial statements. Before stocks and bonds are issued, investiture bankers perform due diligence examinations, which entail carefully evaluating a companys worth in terms of money and equipment (as pay offs) and debt (liabilities). This examination requires the full disclosure of a companys strengths and weaknesses. The company pays the investiture specie banker after the securities deal is completed and these fees often hunt from 3 to 7 percent of what a company raises, depending on the type of transaction. Investment banks aid companies and governments in transmiting securities as well as investors in purchasin g securities, managing investiture fundss, and job securities.Investment banks take the form of brokers or agents who purchase and sell securities for their clients dealers or principals who debauch and sell securities for their personal interest in crook a profit and broker-dealers who do both. The primary service provided by investing banks is underwriting, which refers to guaranteeing a company a set price for the securities it plans to issue. If the securities fail to sell for the set price, the investment bank pays the company the difference. Therefore, investment banks must carefully determine the set price by con gradientring the expectations of the company and the state of the market place for the securities. In addition, investment banks provide a plethora of other function including financial advising, acquisition advising, divestiture advising, buying and change securities, interest-rate swapping, and debt-for-stock swapping. Nevertheless, close of the revenues of investment banks come from underwriting, selling securities, and setting up mergers and acquisitions.When companies need to raise large amounts of capital, a group of investment banks often participate, which are referred to as syndicates. Syndicates are hierarchically structured and the members of syndicates are grouped fit to lead functions managing, underwriting, and selling. Managing banks sit at the pinch of the hierarchy, conduct due diligence examinations, and receive management fees from the companies. Underwriting banks receive fees for sharing the hazard of securities offerings. Finally, selling banks function as brokers within the syndicate and sell the securities, receiving a fee for each share they sell. Nevertheless, managing and underwriting banks usually also sell securities. All major investment banks have a syndicate department, which concentrates on recruiting members for syndicates managed by their firms and responding to recruitments from other firms. A r enewing of legislation, mostly from the 1930s, governs investment banking. These laws require public companies to fully disclose breeding on their trading operations and financial position, and they mandate the separation of commercial and investment banking.The latter mandate, however, has been relaxed over the intervening yrs as commercial banks have entered the investment banking market. An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the clients agent in the issuing of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, refractory income instruments, foreign exchange, commodities, and equity securities. Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (GlassSteagall Act) until 1999 (GrammLeachBliley Act), the linked States prolonged a separation mingled with investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation. There are two main lines of business in investment banking. commerce securities for cash or for other securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) is the sell side, while dealing with pension funds, mutual funds, beleaguer funds, and the investing public (who consume the products and services of the sell-side in establish to maximize their return on investment) constitutes the buy side. Many firms have buy and sell side components. An investment bank gouge also be split into private and public functions with a Chinese jetty which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the pu blic areas such as stock digest deal with public information. An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities & Exchange Commission (SEC) and fiscal Industry Regulatory Authority (FINRA) regulation. Investment banking is a field of banking that aids companies in acquiring funds.In addition to the of new funds, investment banking also offers advice for a wide range of transactions a company might engage in. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals. In the United States, it was illegal for a bank to have both commercial and investment banking until 1999, when the Gramm-Leach-Bliley Act legalized it. Through investment banking, an institution generates funds in two different ways. They may heap on public funds through the capital market by selling stock in their company, and they may also seek out estimate capital or pr ivate equity in exchange for a stake in their company. Investment bankers give companies advice on mergers and acquisitions, for example.They also track the market in order to give advice on when to make public offerings and how best to manage the business public pluss. Some of the consultative activities investment banking firms engage in overlap with those of a private brokerage, as they will often give buy-and-sell advice to the companies they represent. The line surrounded by investment banking and other forms of banking has blurred in recent years, as deregulation allows banking institutions to take on more(prenominal) and more sectors.With the advent of mega-banks which operate at a number of levels, many of the services often associated with investment banking are being made available to clients who would otherwise be too small to make their business profitable. Careers in investment banking are lucrative and one of the most sought after positions in the money markets. A c areer in investment banking involves extensive travelling, gruelling hours and an often cut-throat lifestyle. While highly competitive and meter intensive, investment banking also offers an exciting lifestyle with huge financial incentives that are a draw to many muckle.HISTORY & DEVELOPMENT OF investing BANKINGInvestment banking began in the United States somewhat the midpoint of the 19th century. Prior to this period, auctioneers and merchantsparticularly those of Europeprovided the majority of the financial services. The mid-1800s were marked by the countrys greatest frugal growth. To fund this growth, U.S. companies looked to Europe and U.S. banks became the intermediaries that secured capital from European investors for U.S. companies. Up until World War I, the United States was a debtor nation and U.S. investment bankers had to rely on European investment bankers and investors to share guess and underwrite U.S. securities. For example, investment bankers such as John Pi erpont (J. P.) Morgan (1837-1913) of the United States would buy U.S. securities and resell them in London for a high price. During this period, U.S. investment banks were linked to European banks. These connections included J.P. Morgan & Co. and George Peabody & Co. (based in London) Kidder, Peabody & Co. and Barling Brothers (based in London) and Kuhn, Loeb, & Co. and the Warburgs (based in Germany).Since European banks and investors could not assess businesses in the United States easily, they worked with their U.S. counterparts to monitor the success of their investments. U.S. investment bankers often would hold seats on the boards of the companies issuing the securities to supervise operations and make sure dividends were paid. Companies established long-term relationships with particular investment banks as a consequence. In addition, this period saw the development of two basic components of investment banking underwriting and syndication. Beca example some of the companies seeking to sell securities during this period, such as railroad and utility companies, unavoidable substantial amounts of capital, investment bankers began under-writing the securities, thereby guaranteeing a specific price for them. If the shares failed to fetch the set price, the investments banks covered the difference. Underwriting allowed companies to raise the funds they needed by issuing a sufficient amount of shares without inundating the market so that the value of the shares dropped.Because the value of the securities they underwrote frequently surpassed their financial limits, investment banks introduced syndication, which involved sharing risk with other investment banks. Further, syndication enabled investment banks to establish larger networks to distribute their shares and hence investment banks began to develop relationships with each other in the form of syndicates. The syndicate structure typically included three to five tiers, which handled varying degrees of sha res and responsibilities. The structure is often thought of as a pyramid with a few large, influential investment banks at the apex and small banks below. In the first tier, the originating broker or house of issue (now referred to as the manager) investigated companies, determined how much capital would be raised, set the price and number of shares to be issued, and decided when the shares would be issued.The originating broker often handled the largest strength of shares and eventually began charging fees for its services. In the second tier, the purchase syndicate took a small number of shares, often at a slightly higher price such as I percent or 0.5 percent higher. In the third tier, the banking syndicate took an even smaller amount of shares at a price higher than that paid by the purchase syndicate. Depending on the size of the issue, other tiers could be added such as the selling syndicate and selling group. Investment banks in these tiers of the syndicate would just sell shares, but would not agree to sell a specific amount. Hence, they functioned as brokers who bought and exchange shares on commission from their customers. From the mid-i800s to the early 1900s, J. P. Morgan was the most influential investment banker. Morgan could sell U.S. bonds overseas that the U.S. Department of the Treasury failed to sell and he led the financing of the railroad. He also raised funds for General Electric and United States Steel. Nevertheless, Morgans control and influence helped cause a number of stock panics, including the panic of 1901.Morgan and other powerful investment bankers became the target of the muckrakers as well as of inquiries into stock speculations. These investigations included the Armstrong insurance investigation of 1905, the Hughes investigation of 1909, and the specie Trust investigation of 1912. The Money Trust investigation led to most states adopting the so-called blue-sky laws, which were designed to deter investment scams by start-u p companies. The banks responded to these investigations and laws by establishing the Investment Bankers Association to ensure the prudent practices among investment banks. These investigations also led to the creation of the Federal Reserve System in 1913. Beginning about the time World War I broke out, the United States became a creditor nation and the roles of Europe and the United States switched to some extent. Companies in other countries now turned to the United States for investment banking.During the 1920s, the number and value of securities offerings ontogenesisd when investment banks began raising money for a variety of emerging industries automotive, aviation, and radio. Prior to World War 1, securities issues peaked at about $ 1 million, but afterwards issues of more than $20 million were frequent. The banks, however, became mired in speculation during this period as over 1 million investors bought stocks on margin, that is, with money borrowed from the banks. In addit ion, the large banks began speculating with the money of their depositors and commercial banks made forays into underwriting. The stock market crashed on October 29, 1929, and commercial and investment banks lost $30 billion by mid-November. While the crash only stirred bankers, brokers, and some investors and while most people still had their problems, the crash brought about a credit crunch. Credit became so scarce that by 1931 more than cholecalciferol U.S. banks folded, as the Great Depression continued.As a result, investment banking all but frittered away. Securities issues no thirster took place for the most part and few people could afford to invest or would be willing to invest in the stock market, which kept sinking. Because of crash, the government launched an investigation led by Ferdinand Pecora, which became known as the Pecora Investigation. After exposing the corrupt practices of commercial and investment banks, the investigation led to the establishment of the S ecurities and Exchange Commission (SEC) as well as to the signing of the Banking Act of 1933, also known as the Glass-Steagall Act. The SEC became trusty for regulating and overseeing in-vesting in public companies. The Glass-Steagall Act mandated the separation of commercial and investment banking and from thenuntil the late 1980banks had to choose between the two enterprises. Further legislation grew out of this period, too.The Revenue Act of 1932 raised the tax on stocks and required taxes on bonds, which made the practice of raising prices in the different tiers of the syndicate system no longer feasible. The Securities Act of 1933 and the Securities Exchange Act of 1934 required investment banks to make full disclosures of securities offerings in investment prospectuses and charged the SEC with reviewing them. This legislation also required companies to regularly file financial statements in order to make known changes in their financial position. As a result of these acts, b idding for investment banking projects became competitive as companies began to select the lowest bidders and not rely on major traditional companies such as Morgan Stanley and Kuhn, Loeb. The persist major effort to clean up the investment banking industry came with the U.S. v. Morgan case in 1953. This case was a government antitrust investigation into the practices of 17 of the top investment banks.The court, however, sided with the defendant investment banks, concluding that they had not conspired to monopolize the U.S. securities industry and to prevent new entrants beginning around 1915, as the government prosecutors argued. By the 1950s, investment banking began to pick up as the economy continued to prosper. This growth surpassed that of the 1920s. Consequently, major corporations sought new financing during this period. General Motors, for example, made a stock offering of $325 million in 1955, which was the largest stock offering to that time. In addition, airlines, shopp ing malls, and governments began raising money by selling securities around this time. During the 1960s, high-tech electronics companies spurred on investment banking. Companies such as Texas Instruments and Electronic selective information Systems led the way in securities offerings.Established investment houses such as Morgan Stanley did not handle these issues rather, Wall track newcomers such as Charles Plohn & Co. did. The established houses, however, participated in the conglomeration trend of the 1950s and 1960s by helping consolidating companies negotiate deals. The stock market collapse of 1969 ushered in a new era of economic problems which continued through the 1970s, stifling banks and investment houses. The recession of the 1970s brought about a wave of mergers among investment brokers.Investment banks began to dilate their services during this period, by setting up retail operations, expanding into international markets, investing in venture capital, and working with insurance companies. While investment bankers once worked for mulish commissions, they have been negotiating fees with investors since 1975, when the SEC opted to deregulate investment banker fees. This deregulation also gave rise to discount brokers, who undercut the prices of established firms. In addition, investment banks started to implement computer technology in the 1970s and 1980s in order to automate and expedite operations. Furthermore, investment banking became much more competitive as investment bankers could no longer wait for clients to come to them, but had to endeavour to win new clients and retain old ones.ORGANIZATIONAL STRUCTURE & CORE BANKING ACTIVITIESInvestment banking is split into front office, middle office, and back office activities. While large service investment banks offer all lines of business, both sell side and buy side, smaller sell side investment firms such as boutique investment banks and small broker-dealers focus on investment banking and sa les/trading/research, respectively. Investment banks offer services to both corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their securities on the open market, an activity very important to an investment banks reputation. Therefore, investment bankers play a very important role in issuing new certification offerings.Front OfficeInvestment BankingCorporate pay is the traditional aspect of investment banks which also involves helping customers raise funds in capital markets and giving advice on mergers and acquisitions (M&A). This may involve subscribing investors to a security issuance, coordinating with bidders, or negotiating with a merger target. Another term for the investment banking division is corporate finance, and its advisory group is often termed mergers and acquisitions. A pitch maintain of financial information is generated to market the bank to a potential M&A client if the pitch is fortunate, the bank arranges the deal for the client.The investment banking division (IBD) is broadly shared out into industry coverage and product coverage groups. Industry coverage groups focus on a specific industry, such as healthcare, industrials, or technology, and maintain relationships with corporations within the industry to bring in business for a bank. Product coverage groups focus on financial products, such as mergers and acquisitions, leveraged finance, public finance, asset finance and leasing, structured finance, restructuring, equity, and high-grade debt and world(a)ly work and collaborate with industry groups on the more intricate and special(a)ized needs of a client.Sales and TradingOn behalf of the bank and its clients, a large investment banks primary function is buying and selling products. In market making, traders will buy and sell financial products with the goal of making money on each trade. Sales is the term for the investment banks sale s force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas (on a caveat emptor basis) and take orders. Sales desks then communicate their clients orders to the appropriate trading desks, which can price and execute trades, or structure new products that fit a specific need. Structuring has been a relatively recent activity as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities.In 2010, investment banks came under pressure as a result of selling complex derivatives contracts to local municipalities in Europe and the US. Strategists advise external as well as internal clients on the strategies that can be adopted in various markets. Ranging from derivatives to specific industries, strategists place companies and industries in a quantitative framework with full musing of the ma croeconomic scene.This strategy often ingrains the way the firm will operate in the market, the direction it would like to take in terms of its proprietary and run positions, the suggestions salespersons give to clients, as well as the way structures create new products. Banks also undertake risk through proprietary trading, performed by a special set of traders who do not interface with clients and through principal riskrisk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet. The necessity for numerical ability in sales and trading has created jobs for physics, mathematics and engineering Ph.D.s who act as quantitative analysts.Equity ResearchThe research division reviews companies and writes reports about their prospects, often with buy or sell ratings. While the research division may or may not generate revenue (based on policies at dif ferent banks), its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. Research also serves away(p) clients with investment advice (such as institutional investors and high net worth individuals) in the hopes that these clients will execute suggested trade ideas through the sales and trading division of the bank, and thereby generate revenue for the firm. There is a potential conflict of interest between the investment bank and its analysis, in that published analysis can affect the banks profits. Hence in recent years the relationship between investment banking and research has become highly regulated, requiring a Chinese wall between public and private functions.Asset ManagementpicThe asset management division manages money for institutions, such as mutual funds, and wealthy individuals. The business is divided into three sub-divisions. Asset Management Division has the responsibility to co-ordinate and facilitate in term of Strategic and Development Programme in Asset Management. Data Management, Performance Managing and Information in Asset Management. Fund ManagementThis division manages a number of funds, each with a different focus and strategy. For example the asset management division may have three funds, one focused on private equity investments in emerging markets, another dealing with trade trades, and yet another that buys and holds corporate debt. Clients can choose to place their money with either of these funds. Some banks, such as Bank of New York Mellon, manage exchange-traded funds that are accessible to retail investors. The bank earns revenue by charging a fee for assets under management, and sometimes by charging a commission based on returns. Private Banking and Wealth ManagementThe division manages banking activities of extremely wealthy individuals. Apart from providing regular banking services, such as check clearing, the division also advise such individuals on tax strategy and investments. They work closely with other parts of the asset management division to provide a comprehensive service, e.g. work with fund management to invest in different strategies. Prime BrokerageThe division deals with professional asset managers, such as mutual funds and hedge funds. Their services include executing trades on behalf of these clients, holding custody of their assets, and advising them on potential opportunities. For example When Berkshire Hathaway (BRK) needs to buy a certain security from public markets, it uses a prime broker to buy and hold the security on its behalf. The division works closely with the Sales and Trading division. Additionally, the prime brokerage can also help its clients (hedge funds) to find investors.Middle OfficeThis area of the bank includes risk management, treasury management, internal controls, and corporate strategy. Risk management involves analyzing the market and credit risk that traders are taking onto the balance sheet in conducting their daily trades, and setting limits on the amount of capital that they are able to trade in order to prevent bad trades having a detrimental effect on a desk overall. Another key Middle Office role is to ensure that the economic risks are captured accurately (as per agreement of commercial terms with the counterparty), correctly (as per standardized booking models in the most appropriate systems) and on time (typically within 30 transactions of trade execution). In recent years the risk of errors has become known as operational risk and the assurance Middle Offices provide now includes measures to divvy up this risk.When this assurance is not in place, market and credit risk analysis can be unreliable and open to deliberate manipulation. Additionally, corporate treasury is responsible for an investment banks funding, capital structure management, and liquidity risk monitoring. Financial control tracks and analyzes the capital flo ws of the firm, the Finance division is the principal adviser to ranking(prenominal) management on essential areas such as controlling the firms world-wide risk exposure and the profitability and structure of the firms various businesses via dedicated trading desk product control teams. In the United States and United Kingdom, a Financial Controller is a senior position, often coverage to the Chief Financial Officer. Corporate strategy, along with risk, treasury, and controllers, also often falls under the finance division.Back OfficeOperationsThis involves data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers. Many banks have outsourced operations. It is, however, a critical part of the bank. Due to increased competition in finance related careers, college degrees are now authorisation at most Tier 1 investment banks. A finance degree has proved significant in understanding the depth of the deals and transact ions that emit across all the divisions of the bank.engineeringEvery major investment bank has considerable amounts of in-house software, created by the technology team, who are also responsible for technical support. Technology has changed considerably in the last few years as more sales and trading desks are using electronic trading. Some trades are initiated by complex algorithms for hedging purposes. Firms are responsible for compliance with government regulations and internal regulations. Principal Investing and Proprietary TradingpicInvestment banks have attempted to increase their return on equity by investing their own capital into certain ventures. The bank invests its own capital by taking a equity or debt stake in corporations with the aim of influencing the management. The motive is very similar to that private equity investors the bank tries to profit by turning around companies. The bank can also take short-term positions in the market with its own capital. This is known as proprietary trading, and the bank attempts to earn a profit by correctly predicting market movements.Proprietary trading is very different from normal sales and trading operations where the banks revenue is primarily dependent on the volume of trade it executes on behalf of its client. The notion of the bank risking its own capital can be traced back ever since banking was invented. J.P. Morgan, founder of J P Morgan Chase, was an extremely successful investor. However, in recent years, Goldman Sachs has been the leader in this field in 2007, the bank profited greatly from the proprietary trades that it made against the sub-prime market. In many cases, the banks allow other investors to invest in such ventures (and charge a management fee). This puts them in direct competitor with hedge funds and private equity firms for both investors and investing opportunities.INVESTMENT BANKING IN THE 20TH CENTURYIn the mid-20th century, large investment banks were dominated by the de almakers. Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships. These bulge bracket firms included Goldman Sachs, Morgan Stanley, Lehman Brothers, First Boston and others. That trend began to change in the 1980s as a new focus on trading propelled firms such as Salomon Brothers, Merrill Lynch and Drexel Burnham Lambert into the limelight. Investment banks earned an increasing amount of their profits from proprietary trading. Advances in computing technology also enabled banks to use more sophisticated model driven software to execute trades and generate a profit on small changes in market conditions. In the 1980s, operate Michael Milken popularized the use of high yield debt (also known as junk bonds) in corporate finance and mergers and acquisitions.This fuelled a nab in leverage buyouts and hostile takeovers (see story of Private Equity). Filmmaker Oliver Stone immortalized the spirit of the times with his movie, Wall Street, in which Michael Douglas played the role of corporate raider Gordon Gekko and epitomized corporate greed. Investment banks profited handsomely during the boom years of the 1990s and into the tech boom and bubble. When the tech bubble burst, it precipitated a string of new legislation to prevent conflicts of interest within investment banks. Investment banking research analysts had been actively promoting stocks to investors while privately acknowledging they were not attractive investments. In other instances, analysts gave favourable stock ratings to corporate clients in the hopes of attracting them as investment banking clients and discourse potentially lucrative initial public offerings. These scandals paled by comparison to the financial crisis that has enveloped the banking industry since 2007.The speculative bubble in housing prices along with an overreliance on sub-prime mortgage lending trigged a cascade of crises. Two major investment banks, Bear Stearns and Lehman Brothers, collapsed under the weight of failed mortgage-backed securities. In March, 2008, the Federal government began using a variety of taxpayer-funded bailout measures to prop up other firms. The Federal Reserve offered a $30 billion line of credit to J.P. Morgan Chase to that it could acquire Bear Sterns. Bank of the States acquired Merrill Lynch.The last two bulge bracket investment banks, Goldman Sachs and Morgan Stanley, elected to convert to bank holding companies and be fully regulated by the Federal Reserve. go forward, the recent financial crisis has weakened both the reputation and the dominance of U.S. investment banking organizations throughout the world. The growth of foreign capital markets along with an increase in pools of independent capital is changing the landscape of the industry. The growing international flow of capital has also opened up opportunities for investment banking in new financial centers around the world, including those in developing co untries such as India, China and the Middle EastSIZE OF THE INDUSTRYGlobal investment banking revenue increased for the fifth year running in 2007, to a record US$84.3 billion, which was up 22% on the previous year and more than double the level in 2003. ulterior to their exposure to United States sub-prime securities investments, many investment banks have experienced losses since this time. The United States was the primary source of investment banking income in 2007, with 53% of the total, a harmonise which has fallen somewhat during the past decade. Europe (with Middle East and Africa) generated 32% of the total, slightly up on its 30% share a decade ago. Asiatic countries generated the remaining 15%. Over the past decade, fee income from the US increased by 80%.This compares with a 217% increase in Europe and 250% increase in Asia during this period. The industry is heavily concentrated in a small number of major financial centres, including City of London, New York City, Ho ng Kong and Tokyo. Investment banking is one of the most global industries and is hence continuously challenged to respond to new developments and innovation in the global financial markets. New products with higher margins are constantly invented and manufactured by bankers in the hope of winning over clients and developing trading know-how in new markets. However, since these can usually not bepatented or copyrighted, they are very often copied pronto by competing banks, pushing down trading margins. For example, trading bonds and equities for customers is now a commodity business, but structuring and trading derivatives retains higher margins in good timesand the risk of large losses in difficult market conditions, such as the credit crunch that began in 2007.Each over-the-counter contract has to be unambiguously structured and could involve complex pay-off and risk profiles. Listed option contracts are traded through major exchanges, such as the CBOE, and are almost as commodi tized as general equity securities. In addition, while many products have been commoditized, an increasing amount of profit within investment banks has come from proprietary trading, where size creates a arrogant network benefit (since the more trades an investment bank does, the more it knows about the market flow, allowing it to theoretically make better trades and pass on better guidance to clients).The fastest growing segments of the investment banking industry are private investments into public companies (PIPEs, otherwise known as Regulation D or Regulation S). much(prenominal) transactions are privately negotiated between companies and accredited investors. These PIPE transactions are non-rule 144A transactions. Large bulge bracket brokerage firms and smaller boutique firms deal in this sector. Special purpose acquisition companies (SPACs) or blank check corporations have been created from this industry.