Which component makes up a percentage of the underwriting spread?

The underwriting spread is the difference between what the underwriting syndicate pays the issuing company for its securities and what it charges the public investors for the same securities. This spread typically consists of several components, one of which is the manager's fee. The manager's fee is the portion of the underwriting spread paid to the underwriter that takes on the primary responsibility for managing the underwriting process.

The manager's fee compensates the lead underwriter for coordinating the offering, marketing the securities, and negotiating with the issuer. This fee is essential for covering the costs and efforts involved in bringing the securities to market.

Other options such as dividends, interest payments, and retention fees do not constitute a portion of the underwriting spread. Dividends are payments made to shareholders and are not related to the spread. Interest payments pertain to bond issuances, relating to the borrower’s obligation rather than to the underwriting profits. Retention fees are often associated with compensating financial advisors or issuing parties, but they do not form part of the underwriting spread as defined in this context.