Bulge Bracket

What Is a Bulge Bracket?

"Bulge bracket" is a slang term that describes the company or companies in an underwriting syndicate that issued the largest number of securities on a new issue. The bulge bracket is usually the first group listed on the tombstone — a print advertisement of a new issue.

Bulge bracket is also a catchall term for the most profitable multi-national investment banks in the world, whose banking clients are normally large institutions, corporations, and governments. Then there are boutique banks — smaller, younger banks that specialize in certain areas of investment banking and handle smaller deals.

Understanding Bulge Bracket

As the largest firm in an underwriting syndicate, a bulge bracket may also act as the manager or co-manager of the underwriter syndicate. In the investment banking industry, syndicates are formed so that underwriting companies can share the risks and profits associated with a new security issue with other firms. The larger the new issue, the more firms are likely to take part in the new issue through syndication.

The term bulge bracket as a catchall for investment banks is less used since the financial crisis, being replaced with the terms tier one, tier two, or tier three.

Types of Bulge Bracket

Beyond firms being involved in underwriting syndicates, bulge bracket may also refer to major investment banks. Bulge bracket investment banks usually provide both financing and advisory banking services, in addition to market making, sales, and research for various financial products. The bulge bracket is usually the book-running manager or the bank that controls the allocation of securities to investors. It is listed in the larger print above all others and on the prospectus cover.

As a catchall term for this class of large global investment bank, "bulge bracket" commonly refers to Bank of America Merrill Lynch, Goldman Sachs, Barclays Capital, Credit Suisse, Deutsche Bank, JPMorgan Chase, Citigroup, Morgan Stanley, and UBS. As massive multinational banks, these investment banks offer all kinds of services to clients and many also run retail banking operations.

Since the global financial crisis of 2008, "bulge bracket" as a catchall term has been somewhat outmoded by the practice of referring to investment banks as "tier one," "tier two," or "tier three" investment banks. The only tier one investment bank might be JPMorgan Chase because it ranks first or second globally across most product areas. Tier two would be Goldman Sachs, Barclays Capital, Credit Suisse, Deutsche Bank, and Citigroup. Examples of tier three would be UBS, BNP Paribas, and SocGen.