American stock exchange
Around 200 years ago there was no paper money changing hand, or even the idea of stocks. Instead trade was primarily exchange of silver for papers saying they owned shares in cargo that was coming in on ships every day. The trade flourished. The English required funds for its wartime operations during the American Revolution. One of the sources of finance was by selling bonds. Bonds are debt securities issued by companies or government entities. Bonds represent promises by the companies or government entities to pay interest at specified rates on specified dates, and to redeem the Bonds on a specified date. Bond values typically fall when Interest Rates rise, and rise when Interest Rates fall. Thus, was established a culture of trading though there was not organized market for it.
The American Stock exchange (AMEX) started of as a curb market many people opine that it grew out of the California gold rush in the early 1800 and dealt mainly in shares of mining companies. The AMEXs history dates back to colonial times when stock brokers used to create outdoor markets to trade government securities. It was believed to have started around 1849 at the curbstone on Broad Street near Exchange Place. The curb brokers used to assemble near the lamp posts and mail boxes on the Broad Street, resisting wind and weather, to trade in their stocks. From the nature of trading it became popular as the Curb exchange as all its transactions took place outdoors. By 1908 it became popular as the New York Curb Agency. The AMEX was formed as a mutual organization, owned by its members.
With the increase in the trading activity, use of verbal communication did not seem to be a viable medium for trading as shouting reached high levels. They introduced special hand signals as an alternative using which the brokers would use to communicate their trade terms. In 1921 the AMEX moved indoors into the building where it currently resides on the Wall Street, and the hand signals continued to be the mode of communication even today after the advent of the latest trading and communication technologies. It was popular as the New York Curb Exchange between 1929 and 1953 and thereafter christened with its present name American Stock exchange.
For many years, AMEX has been known as the marketplace for securities not considered as reputable enough for listing on the American Stock exchange (NYSE), but over a period it has undergone transformation and is today an equally respectable exchange with its own listing requirements for securities and admissions requirements for members. Today it boasts to be the third-largest stock exchange by trading volume in the United States. Located in New York City in the proximity of the NYSE on the Wall Street, it handles about a tenth of the volume all securities traded in the U.S. It used to be a strong competitor to the American Stock exchange.
In 1998 it was merged with the National Association of Securities Dealers (NASD), then-owner of the NASDAQ exchange, to form the NASDAQ-Amex Market Group where AMEX is an independent entity of the NASD parent company. The marriage did not last long. Ideological differences between the NASD and AMEX members led to acquisition of control of the AMEX in the year 2004.
Trading activities on the AMEX include a wide portfolio from small-cap stocks to exchange-traded funds and derivatives. The exchange pioneered index options and trades options on 25 broad-based and sector indices. The exchange has also lead the way in the development of Exchange Traded Funds (ETFs). AMEX computes and publishes a wide variety of indices to support the investors in evaluating the index-based products such as ETFs, index options, and structured products.
The Amex has also set a trend in the area of index options too. Today AMEX trades put-and-call options on broad market, industry sector, and international indexes. Index options enable for investors to trade the entire market ( as Index funds are linked to Index of the exchange, eg. Dow Jones) to seek either profit or protection from price movements in a stock market as a whole or in broad segments of a particular market. Today it is one of the largest options exchanges in the United States.
The exchange trades more than 160 ETFs; 17 Holding Company Depositary Receipts; and more than 350 structured products such as notes linked to currencies, equities, and indexes. The AMEX stocks are tracked by investors on three indices, namely, the Amex Composite Index, the Amex Major Market Index and the Amex Derivatives Index (which includes Diamonds - Units of beneficial interest in the Diamonds Trust, a Unit Investment Trust that holds the 30 component stocks of the Dow Jones Industrial Average). Apart from the above, over 700 companies and 20 corporate bonds are listed on this exchange. Being in the proximity of the World Trade Center, it was affected by the September 11, 2001 attacks, but has recovered ever since then. It upgraded its trading space with cutting-edge, voice trading technology in 2002.
With the National Association of Securities Dealers (NASD) transferring control of the Amex back to its members in 2004, AMEX members elected a new board comprising of 15 members, nine independent and six industry governors. The Amex's equity segment is a centralized, specialist-based auction market, and the exchange is currently making upgrades to its trading technology, which includes the Amex New Trading Environment (ANTE) for equity options. The AMEX also expects to upgrade all its operations in order to meet Regulation NMS compliance requirements. This will result in a sea change in Amex's trading environment which would be largely automated with the support of the electronic communication network. However, technology invasion into the daily operations and trading activity will not lead to closure of trading floors. Unlike many other exchanges around the world, it did not relinquish floor trading in favor of computer trading, and at the beginning of the 21st century, the Amex was the second largest floor-based exchange in the United States. AMEX is committed to retain its human-based Open Outcry system of trading for those investors who desire it.
Over the years the AMEX had shifted its focus from stocks to options; however it still continues to trade in small and mid-size stocks. Today the AMEX has grown in size and is as powerful as the New York Stock Exchange and has some of the leading US enterprises as well as foreign companies listed on its indices. Some of the popular listed companies on the AMEX include British American Tobacco (ADRs), Imperial Oil Limited, Nabors Industries, Ivax Corporation, Seaboard Corporation and Bio-Rad Laboratories.
AMEX has seen the ups and downs of different times. From its existence for nearly 200 years it has learnt from various situations but had always stayed committed to the niche market it primarily catered from the day of its coming into existence. It has got a long way to go and we can see a lot more transformational changes to take place for AMEX.
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