A bulge bracket bank is an investment institution that issues the largest amount of securities in a securities issuance. This designation is considered prestigious, and may be used by a bank to market itself to prospective clients.
When an entity issues securities, it may do so through a syndicate of investment banks; the syndicate is formed to share the risk of issuing the securities to investors. Whichever investment bank in this group is issuing the most securities is considered the bulge bracket bank. This bank manages the issuance of securities on behalf of the syndicate.
A bulge bracket bank is typically the first name listed on a securities issuance tombstone, which is the advertisement announcing the sale of securities. The names at the top of the list may be stated in a larger font, which appears to make these names bulge out from the page (hence the name).
The term can also refer to that investment bank which underwrites the largest amount of securities in an industry. The term is usually restricted to just a small number of banks. There is no clear threshold for what constitutes such a bank, since it is more a matter of opinion than an awarded rank. Some banks may claim the status based on the number of deals closed, dollar volume of securities sold, industry surveys of relative bank size, and so forth.
Being designated as a bulge bracket bank is considered a major issue among investment banks, since the designation confers a certain amount of prestige that can translate into more deals as the lead syndicator for a securities issuance, along with the additional fees associated with that position. The lead syndicator also receives a larger allotment of securities to sell, which allows it to earn a proportionally larger profit.
The primary clients of these banks are major multi-national corporations and national governments. Smaller issuing entities may be repelled by the sheer size of these banks, and instead prefer to use smaller boutique firms to handle their investment banking needs.