How are underwriters paid?
Underwriters are paid in two ways, which may occur alone or in combination. The first method of payment is through an underwriter s discount. In this method, the underwriter pays less than the full principal amount of the issue as the purchase price to the issuer, then re-offers the bonds to the public at par, or their face amount, keeping the difference (the discount) as compensation. Alternatively, (and more often) the underwriter re-offers the bonds to the public at prices in excess of the par amount, or at a premium, and keeps the premium as additional compensation or as an offset against bonds of the same issue re-offered to the public at discounts.
