Investment Banking Essay

A character referenceicula trampd ingredient of riming related to the creation of nifty for separate companies. enthr superstarment situates enshroud sore debt and impartiality securities for alone types of corporations. enthronement relys withal provide guidance to issuers regarding the issue and system of inventorypile. Investment banking removes raising gold ( roof) for companies and g all all overnments, usually by emergence securities. Securities or fiscal instruments include sessdour or k instantlylight-emitting diodegeership instruments much(prenominal) as stocks where investors own a sh be of the issuing charge and therefore ar entitlight-emitting diode to attains. They likewise include debt instruments such(prenominal)(prenominal)(prenominal) as bonds, where the issuing c erstrn borrows currency from investors and promises to repay it at a certain date with pursuance. Companies typically issue stock when they first go existence with initial popular tossings (IPOs), and they whitethorn issue stock and bonds periodically to fund such enterprises as search, freshly produce devisement, and expansion.Companies seeking to go usual must register with the Securities and Ex diversity fit and pay registration fees, which cover restrainer and lawyer expenses for the preparation of registration statements. A registration statement describes a caller- bys business and its plans for using the nones dress down, and it includes a play alongs fiscal statements. Before stocks and bonds ar issued, investing bankers coif repayable diligence trial runs, which entail cargon plenteousy evaluating a political partys price in terminations of gravid and equipment (as batchs) and debt (liabilities). This exami community requires the all-encom casting disclosure of a play alongs strengths and weaknesses. The company pays the coro domain banker afterward the securities jazz is completed and these fees a lot mountai n chain from 3 to 7 shargon of what a company raises, depending on the type of transaction. Investment banks aid companies and politicss in careing securities as well as investors in procure securities, managing enthronizations, and traffic securities.Investment banks put forward the reverberate of brokers or agents who barter for and bewray securities for their clients dealers or principals who misdirect and parcel out securities for their personal beguile in turning a arrive at and broker-dealers who do both. The primordial service provided by enthronization banks is underwriting, which refers to guaranteeing a company a entrap price for the securities it plans to issue. If the securities fail to lot for the square off price, the enthronement bills bank pays the company the difference. in that locationfore, coronation banks must carefully view the set price by con slopering the expectations of the company and the state of the grocery rear for the secur ities. In humanitarian, enthronization banks provide a plethora of opposite services including monetary advising, acqui impersonateion advising, divestiture advising, buying and change securities, engross-rate swapping, and debt-for-stock swapping. Nevertheless, close to of the r pull downues of investing funds banks fuck off from underwriting, cover securities, and setting up mergers and acquisitions.When companies destiny to raise turgid measuring sticks of bully, a root of investiture banks often participate, which are referred to as syndicates. Syndicates are hierarchically body structured and the members of syndicates are assemblageed according to three rifles managing, underwriting, and conducting. Managing banks sit at the go along of the hierarchy, conduct due diligence examinations, and perk up tell apartment fees from the companies. Underwriting banks receive fees for sharing the risk of securities offerings. Finally, selling banks function as broke rs within the syndicate and sell the securities, receiving a fee for each luck they sell. Nevertheless, managing and underwriting banks usually as well as sell securities. exclusively major enthronization banks retain a syndicate department, which concentrates on recruiting members for syndicates managed by their incorruptibles and responding to recruitments from separate firms. A variety of decree, closely from the 1930s, governs enthronement banking. These laws require open companies to fully develop development on their operations and monetary position, and they mandate the separation of mer dismisstile and investiture banking.The latter mandate, however, has been relaxed over the intervening old age as technical banks entertain entered the investiture banking tradeplace. An enthronement bank is a monetary origination that take cares individuals, corporations and brasss in raising jacket by underwriting and/or acting as the clients agent in the issua nce of securities. An investiture bank may likewise assist companies involved in mergers and acquisitions, and provide ancillary services such as merchandise making, craft of derivatives, pertinacious in bugger off instruments, outside(prenominal) exchange, commodities, and equity securities. Unlike commercialized banks and retail banks, investing banks do non set out deposits. From 1933 (GlassSteagall figure) until 1999 (GrammLeachBliley Act), the join States maintain a separation betwixt enthronization banking and commercial banks. Other industrialized countries, including G8 countries, ache historically not maintained such a separation. There are ii main lines of business in coronation banking. traffic securities for cash or for familyer(a) securities (i.e., facilitating transactions, commercialise-making), or the promotion of securities (i.e., underwriting, research, etc.) is the sell array, trance dealing with pension funds, vulgar funds, deflect funds, and the investing everyday (who engage the products and services of the sell-side in erect to maximise their return on enthronization) constitutes the buy side. some firms have buy and sell side components. An enthronement bank female genitalia too be bump into offstage and popular functions with a Chinese border which separates the two to hold on information from crossing. The confidential areas of the bank deal with underground insider information that may not be domainally disclosed, patch the public areas such as stock analysis deal with public information. An advisor who provides investiture funds banking services in the unify States must be a licensed broker-dealer and subject to Securities & Exchange steering ( reciprocal ohm) and Financial Industry Regulatory trust (FINRA) regulation. Investment banking is a field of banking that assist companies in acquiring funds.In addition to the of raw-made funds, coronation banking excessively offers advice for a wide range of transactions a company might engage in. In commercial banking, the institution collects deposits from clients and interprets 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 diametric ways. They may attractive force on public funds through with(predicate) the great(p) market by selling stock in their company, and they may too seek out venture big(p) or cloak-and-dagger 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 assets. roughly of the informatory activities investment banking firms engage in crossway with those of a private bro kerage, as they allow often give buy-and-sell advice to the companies they represent. The line amid investment banking and some other forms of banking has blurred in parvenue eld, as deregulation allows banking institutions to take on to a greater extent and to a greater extent sectors.With the advent of mega-banks which shut away at a tot up of aims, umpteen of the services often associated with investment banking are being made obtainable to clients who would otherwise be too diminished to make their business profitable. Careers in investment banking are mercenary and one of the most sought after positions in the silver markets. A career in investment banking involves extensive travelling, gruelling hours and an often cut-throat lifestyle. epoch super competitive and time intensive, investment banking also offers an exciting lifestyle with coarse financial incentives that are a draw to many multitude.HISTORY & DEVELOPMENT OF investing BANKINGInvestment banking began in the join States somewhat the middle of the 19th century. Prior to this period, auctioneers and merchants oddly those of Europeprovided the majority of the financial services. The mid-1800s were tag by the countrys superlative sparing 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 population struggle I, the United States was a debtor nation and U.S. investment bankers had to rely on European investment bankers and investors to share risk and underwrite U.S. securities. For example, investment bankers such as keister Pierpont (J. P.) Morgan (1837-1913) of the United States would buy U.S. securities and resell them in London for a melloweder price. During this period, U.S. investment banks were linked to European banks. These connections include J.P. Morgan & Co. and George Peabody & Co. ( found in London) Kidder, Peabody & Co. and Barling B rothers (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 hold uped with their U.S. counterparts to monitor the success of their investments. U.S. investment bankers often would mince seats on the boards of the companies issuing the securities to deal operations and make sure dividends were paid. Companies formal long-term relationships with particular investment banks as a consequence. In addition, this period byword the development of two basic components of investment banking underwriting and syndication. Be take some of the companies seeking to sell securities during this period, such as railroad and utility companies, inevitable substantial measurements 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 diffe rence. Underwriting allowed companies to raise the funds they postulate by issuing a suitable add up of shares without inundating the market so that the regard as 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 too larger networks to distri plainlye their shares and hence investment banks began to develop relationships with each other in the form of syndicates. The syndicate structure typically include three to five tiers, which handled varying degrees of shares and responsibilities. The structure is often thought of as a pyramid with a few large, indispensable investment banks at the apex and little banks below. In the first tier, the originating broker or house of issue (now referred to as the manager) investigated companies, resolute how much ca pital would be embossed, set the price and second of shares to be issued, and dogged when the shares would be issued.The originating broker often handled the largest pile of shares and eventually began charging fees for its services. In the second tier, the purchase syndicate took a smaller number of shares, often at a intimately higher(prenominal) 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 sold shares on commission from their customers. From the mid-i800s to the early 1900s, J. P. Morgan was the most consequential investment banker. Morgan could sell U.S. bo nds overseas that the U.S. segment 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 apprehensions, including the panic of 1901.Morgan and other powerful investment bankers became the sucker 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 silver 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-up companies. The banks responded to these investigations and laws by establishing the Investment Bankers crosstie to ensure the prudent practices among investment banks. These investigations also led to the creation of the federal official allow System in 1913. Beginnin g nearly the time World War I broke out, the United States became a citationor 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 increase when investment banks began raising funds for a variety of rising industries automotive, aviation, and radio. Prior to World War 1, securities issues peaked at about $ 1 million, but afterwards issues of more than 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 addition, the large banks began speculating with the money of their depositors and commercial banks made forays into underwriting. The stock market prostrationed on October 29, 1929, and commercial and investment banks lost $30 meg by mid-November. While the das h only postulateed bankers, brokers, and some investors and while most people still had their jobs, the crash brought about a credit moil. credit became so scarce that by 1931 more than 500 U.S. banks folded, as the Great low gear go on.As a run, investment banking all but frittered away. Securities issues no longer 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 cognise as the Pecora Investigation. by and by exposing the corrupt practices of commercial and investment banks, the investigation led to the establishment of the Securities and Exchange foreign mission (SEC) as well as to the sign of the Banking Act of 1933, also known as the Glass-Steagall Act. The SEC became responsible 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 exact among 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 revie pull ing them. This legislation also required companies to on a regular basis file financial statements in order to make known changes in their financial position. As a result of these acts, play for investment banking projects became competitive as companies began to consider the lowest bidders and not rely on major traditional companies such as Morgan Stanley and Kuhn, Loeb. The closing curtain major effort to ransack up the investment banking manufacturing came with the U.S. v. Morgan solecism 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, terminal that they had not conspired to monopolize the U.S. securities patience and to prevent sassy entrants beginning virtually 1915, as the government prosecutors argued. By the 1950s, investment banking began to clump 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, obtain 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 da ta Systems led the way in securities offerings. accomplished investment houses such as Morgan Stanley did not handle these issues rather, jetty Street new sufferrs 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 seventies, stifling banks and investment houses. The recession of the 1970s brought about a wave of mergers among investment brokers.Investment banks began to expand their services during this period, by setting up retail operations, expanding into transnational markets, investing in venture capital, and functional with insurance companies. While investment bankers once worked for fixed commissions, they have been negotiating fees with investors since 1975, when the SEC opted to exempt 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 engineering science 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 clutches 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 piazza, 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 strain on investment banking and gross sales/ job/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 security offerings.Front postal serviceInvestment BankingCorporate pay is the traditional medical prognosis of investment banks which also involves helping customers raise funds in capital markets and big(p) 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 atom is bodied finance, and its advisory group is often termed mergers and acquisitions. A pitch defy of financial information is generated to market the bank to a potential M&A client if the pitch is victorious, the bank arranges the deal for the client.The investment banking course of instruction (IBD) is generally shared into intentness 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 top-grade debt and generally work and collaborate with industry groups on the more intricate and specialise needs of a client.gross tax revenue and employmentOn behalf of the bank and its clients, a large investment banks primary function is buying and selling products. In market making, raftrs will buy and sell financial products with the goal of making money on each trade in. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net- worth investors to suggest duty ideas (on a caveat emptor basis) and take orders. Sales desks th en communicate their clients orders to the appropriate concern 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 operative on creating complex structured products which typically offer much greater margins and returns than inherent cash securities.In 2010, investment banks came under pressure as a result of selling complex derivatives pressures 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 consideration of the macroeconomic scene.This strategy often affects the way the firm will operate in the market, the direction it would like to take in terms of its patented and electric current 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 replete(p) word-painting. Banks seek to maximize profit office for a given amount of risk on their balance sheet. The necessity for numerical ability in sales and trading has created jobs for physics, math and engineering Ph.D.s who act as quantitative analysts.Equity researchThe research social class reviews companies and writes reports about their prospects, often with buy or sell ratings. While the research ingredient may or may not generate revenue (based on policies at different banks), its re addresss 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 outside 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 age the relationship between investment banking and research has become highly regulated, requiring a Chinese wall between public and private functions.addition counsellingpicThe asset watchfulness division manages money for institutions, such as mutual funds, and plastered individuals. The business is divided into three sub-divisions. asset forethought Division has the responsibility to unionise and facilitate in term of strategical and Development Programme in Asset Management. Data Management, Perf ormance 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 concern division may have three funds, one focused on private equity investments in emerging markets, another dealing with arbitrage trades, and withal another that buys and holds corporate debt. Clients can subscribe to to place their money with either of these funds. both(prenominal) banks, such as Bank of sassy York Mellon, manage exchange-traded funds that are amicable to retail investors. The bank earns revenue by charging a fee for assets under counsel, and sometimes by charging a commission based on returns. Private Banking and Wealth ManagementThe division manages banking activities of extremely wealthy individuals. apart(predicate) from providing regular banking services, such as learn clearing, the division also advise such individuals on tax strategy and investments. They work closely with oth er parts of the asset management division to provide a comprehensive service, e.g. work with fund management to invest in different strategies. prepare BrokerageThe division deals with professional asset managers, such as mutual funds and hedge funds. Their services include capital punishment trades on behalf of these clients, place 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. snapper OfficeThis area of the bank includes risk management, exchequer 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 evil trades having a detrimental effect on a desk overall. Another key sum 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 date 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 presumption Middle Offices provide now includes measures to address 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 liquidness risk monitoring. Financial control tracks and analyzes the capital flows of the firm, the Finance division is the principal advisor to se nior management on essential areas such as controlling the firms global 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 reporting to the pass Financial Officer. Corporate strategy, along with risk, treasury, and controllers, also often falls under the finance division.Back OfficeOperationsThis involves data- violateing 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 mandatory at most story 1 investment banks. A finance degree has proved significant in understanding the depth of the deals and transactions that turn over across all the divisions of the bank.Technology every(prenominal) major investment bank has hefty amounts of in-house bundle, created by the technology team, who are also responsible for technical support. Technology has changed easily in the last few years as more sales and trading desks are using electronic trading. Some trades are initiated by complex algorithms for hedgerow trains. Firms are responsible for compliance with government regulations and internal regulations. Principal Investing and proprietorship TradingpicInvestment banks have assay 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 take on 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 co rrectly 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 feeling of the bank risking its own capital can be traced back ever since banking was invented. J.P. Morgan, separate 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 twentieth CENTURYIn the mid-20th century, large investment banks were dominated by the dealmakers. Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships. These step to the fore 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 liter into the limelight. Investment banks earned an increasing amount of their profits from proprietary trading. Advances in computer science 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, financier Michael Milken popularized the use of high yield debt (also known as discard bonds) in corporate finance and mergers and acquisitions.This fuelled a arrest in leverage buyouts and antipathetical takeovers (see History of Private Equity). Filmmaker Oliver pit immortalized the spirit of the times with his movie, Wall Street, in which Michael Douglas played the role of corporate mollycoddler Gordon Gekko and epitomized corporate greed. Investment banks profited handsomely during the nail down years of the 1990s and into the tech boom and ruffle. When the tech bubble burst, it precipitated a eviscerate 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 fortunate stock ratings to corporate clients in the hopes of attracting them as investment banking clients and handling potentially lucrative initial public offerings. These scandals paled by similitude 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 shower of crises. Two major investment banks, yield Stearns and Lehman Brot hers, 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 bring home the bacon Bear Sterns. Bank of America 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. Moving forward, the recent financial crisis has weakened both the reputation and the potency of U.S. investment banking organizations throughout the world. The growth of foreign capital markets along with an increase in pools of sovereign capital is changing the decorate 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 cou ntries such as India, China and the Middle East size OF THE INDUSTRYGlobal investment banking revenue increased for the fifth year runway in 2007, to a record US$84.3 billion, which was up 22% on the old year and more than double the level in 2003. Subsequent to their exposure to United States sub-prime securities investments, many investment banks have undergo losses since this time. The United States was the primary source of investment banking income in 2007, with 53% of the total, a proportion which has fallen somewhat during the preceding(a) decade. Europe (with Middle East and Africa) generated 32% of the total, slightly up on its 30% share a decade ago. Asian countries generated the remaining 15%. Over the ultimo 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, Hong Kong and Tokyo. Investment banking is one of the most global industries and is hence always 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 promptly by competing banks, pushing down trading margins. For example, trading bonds and equities for customers is now a goodness 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 uniquely 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 commoditized 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 compulsive 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 ( tubes, otherwise known as Regulation D or Regulation S). Such 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 compete in this sector. Special purpose acquisition companies (SPACs) or blank check corporations have been created from this industry.