Penalty Bid
A bid intended to facilitate a securities offering by stabilizing its price during the distribution period. This bid is typically entered by the managing underwriter on behalf of a syndicate.
Investopedia Commentary
A syndicate penalty bid can be displayed on the Nasdaq system during a security's registered public offering period. This activity is permissible under SEC Rule 10b-7.
Related Links
IPO Basics Tutorial
The Murky Waters Of The IPO Market
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Brokerage Functions: Underwriting And Agency Roles
See also: IPO, Nasdaq, SEC, Syndicate, Underwriting
penalty bid