"The Syndicate"---or why you never can get the hot issues; On Allocation Rules, Theory and Practice

When a brokerage firm, through competitive bidding, has secured part of a "syndicate" to sell an IPO, it also secures for the firm, should it choose, to elect to keep some shares in lieu of commission, allocate shares to the preferred investors of the branch etc. These rules have been in some dispute over the years, and usually the dispute occurs on an initial public offering where the stock is a very popular offering that the public might bid up the stock right away and lots of money could be made quickly---the rules of allocation tend to favor those investors that have been the "best customers" of the firm, or have generated the most commissions. So. One way of testing this is to identify a public offering that you think will be very hot, and then try to get some of the stock. You might be frustrated with the fact that this might be very difficult to do, and you might be in line, and a very long line.