BizTerm Definition
Commissions
Full Definition

The commissions paid to brokers for buying or selling stock range from 3 to 5 cents a share for institutions to 15 cents a share for discount brokers. But when you purchase an IPO at the offer price, you pay no commission. Instead, the underwriter charges the issuing company a gross spread, which is the difference between the public offering price and what the issuing company received. Typically, this spread is 7% to 8% of the IPO's offering price. The profitability of doing IPOs is one important reason why investment banks focus on developing this business.


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