ABSTRACT
The increased use of the negotiated sale as a means of issuing bonds has been a striking characteristic of the municipal securities market during the past decades. In a negotiated sale, the securities are offered to an underwriter or underwriting syndicate which is selected in advance of the sale date by the issuer. The terms are subject to negotiation between the issuer and the purchaser. Many issuers have chosen to issue a request for proposals (RFP) as a means of selecting an underwriter or underwriting syndicate. The RFP enables the finance officer to choose an experienced underwriter from a very large group of capable firms. In the vast majority of cases, the underwriting spread is the largest component of total issuance costs. The underwriting fee, also called the "risk" is designed to compensate the underwriter for taking the risk of purchasing the entire bond issue before it has received offsetting orders from investors for all of the bonds.
