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The review provides key insights into the success and resilience of the Amex's business units in the past year, including a strong increase in new listings, that set the stage for continued strong performance in the year ahead as a newly independent securities exchange, positioned to better manage its challenges and opportunities and to compete more aggressively in its chosen markets.
Highlights for 2004 include:
- Again, the Amex Composite Index (XAX) strongly outperformed all domestic broad-based indexes, closing more than 22 percent higher than it closed on December 31, 2003, and almost 70 percent higher than it closed three years ago on December 31, 2001.
- Amex Equities Group listed 90 new companies, an increase of more than 18 percent over 2003.
- The Amex added 22 new exchange traded funds in 2004 for a total of 144 listings or 85 percent of all domestic ETF listings.
- The Amex Options business saw trading volumes in 2004 increase more than 12 percent over 2003 and rolled out a new trading technology designed to improve the Amex's competitiveness.
- The Amex listed 12 new closed-end funds in 2004, among them the largest closed-end real estate fund in the U.S. Over the past four years, the number of Amex-listed funds doubled to 150.
- The Amex Capital Markets Group also posted another year of solid growth, listing 115 new structured products for a total 325 structured products traded at December 31, 2004.
- The transaction transferring control of the Amex from the NASD to The Amex Membership Corporation closed on December 31, 2004.
"The Amex demonstrated its ability to adapt and innovate successfully in a highly competitive marketplace," Peter Quick, president of the Amex, added. "Looking ahead, the Amex is developing a number of promising products and system innovations designed to further improve its competitiveness."
Following are brief highlights from each Amex business line.
Equities
Amex Equities is home to companies in all stages of development, from large mature organizations to smaller entrepreneurial companies, all of which enjoy a unique and cost-effective combination of high-level issuer service and support and Amex's specialist-driven auction-based market structure, which helps guard against undue volatility and provides a price-discovery mechanism unavailable in purely electronic markets.
These attributes helped convince 90 new companies to list their shares on the Amex in 2004, an increase of more than 18 percent over new company listings in 2003, and included three Equity Income Hybrid Securities (EIHS), a new type of security that debuted in U.S. markets at the Amex in 2003. EIHS listings combine shares of a company's common stock and debt into one security that trades like a stock.
Amex-listed companies represent a highly diverse universe, geographically as well as by industry sector. In 2004, the Amex acted to extend that universe, kicking off an intensive effort to attract listings from outside North America; an effort that resulted in new listings from companies based in China, Taiwan, Israel, and the United Kingdom.
"We are aggressively pursuing new listings around the world," said Amex Equities Senior Vice President John McGonegal. "As in North America, we seek out quality companies that are poised to grow and whose management is looking for an opportunity to cost-effectively interact with the U.S.-based investor community."
Looking ahead, Mr. McGonegal expects new listings from Europe and the Far East to accelerate in 2005.
A measure of the quality of Amex-listed companies is the performance of the Amex Composite Index, which outpaced every domestic broad based index in the past year-as well as over the past three years-including the Dow Jones Industrial Average, Dow Jones Wilshire 5000 Composite, Nasdaq Composite, NYSE Composite, Russell 2000, and S&P 500 indexes.
In 2004, the XAX finished the year more than 22 percent higher than 2003's close, nearly 70 percent higher than its close at the end of 2001.
Exchange Traded Funds (ETFs)
The Amex continues as the premier listing venue for exchange traded funds, a product category it pioneered in 1993. Since then-in good part due to the Amex's expertise and experience in helping issuers bring new ETFs to market-ETFs have grown to become an extremely popular financial product category and an excellent business for the Amex.
In 2004, the Amex listed 22 new ETFs, far outpacing other competing exchanges and bringing its total listings to 144, an 85 percent share of the 169 domestically listed ETFs. Total assets of Amex-listed ETFs increased to some $204 billion, an increase of more than 32 percent over total Amex-listed ETF assets in 2003.
The Amex's new ETF listings in 2004 were Vanguard Group's 18 VIPERs, the iShares S&P 1500 Index Fund from Barclays Global Investors, PowerShares Golden Dragon Halter USX China Portfolio and High Yield Equity Dividend Achievers Portfolio, and the SPDR O-Strip ETF.
The Amex also launched four new indexes in 2004, including the Amex Gold Miners Index, which is comprised of publicly traded companies involved primarily in gold and silver mining; and the Halter USX China Index, which is made up of publicly traded U.S.-listed companies that conduct the majority of their business within the People's Republic of China.
While building on its substantial number of index-based ETF listings, the Amex also continued its effort to expand the product category to include ETFs based on actively managed portfolios. Based on coverage in the financial media in 2004 and statements of financial industry sources in those reports, it is fair to say there is a great deal of anticipation for this new ETF class.
"Actively managed ETFs have been in development for a number of years and have already generated a high level of attention and interest in the financial media and the financial industry at large," Clifford J. Weber, senior vice president of the Amex ETF Marketplace, said, adding that actively managed ETFs represent a "substantial new business opportunity, with significant growth potential for the coming years."
Lastly, in the final days of 2004, the Amex and the financial industry lost one of its premier financial product pioneers with the death of Nathan Most at 90 years of age. Mr. Most, who headed new product development at the Amex in the late 1980s and early 1990s, was instrumental in designing and bringing to market the first ETFs, starting with the popular Standard & Poor's Depositary Receipts, called the Spider. Spiders are the largest ETF with $55 billion in assets at December 31, 2004.
Options
The Amex is one of the world's leading options exchanges and celebrated its 30-year anniversary as an options exchange this January.
In 2004, Amex Options rolled out a new trading technology, called ANTE for Amex New Trading Environment. Designed to deliver significant improvements in speed, liquidity and access, all of which will greatly enhance the Amex's competitiveness in options trading, the ANTE roll-out is scheduled for completion in the first half of 2005.
The Amex garnered more than 17 percent of all options trades in 2004 with a total of 202.7 million options contracts and an average daily volume for the year of 804,334. In equity options trades, which make up the majority of the Amex's options trading volume, the Amex's market share was better than 18 percent with 195.4 million contracts and an average daily volume of 775,405.
"In 2004, the Amex Options business stabilized its share of market and brought market quality improvements to bear with its new ANTE trading technology," Michael T. Bickford, senior vice president Amex Options, said. "We are excited about 2005 and the solutions we're delivering now to meet the needs of today's and tomorrow's options marketplace."
Amex Closed-End Funds & Structured Products
Amex Closed-End Funds and Structured Products businesses posted strong results in 2004.
The Amex listed 12 new closed-end funds in 2004. Over the past four years, the number of Amex-listed closed-end funds doubled to 150.
In structured products, the Amex Capital Markets Group listed 115 new structured products for a total of 325 structured products trading at the end of 2004. The Capital Markets Group also welcomed two new structured products issuers to the Amex: Amherst Securities Group and Merrill Lynch Depositor, Inc.
Most notable among the new funds that listed on the Amex in 2004 is the largest closed-end real estate fund in the U.S., the ING Clarion Global Real Estate Income Fund, which raised $1.35 billion in its initial public offering and represents the second ING fund listed on the Amex.
The Amex welcomed two new issuers in 2004, ALPS Mutual Funds Services, Inc., and Gabelli Funds, a unit of Gabelli Asset Management Inc. ALPS, with which the Amex has a longstanding relationship in the ETF marketplace, sponsored its first two closed-end funds: Reaves Utility Income Fund and Clough Global Allocation Fund. Gabelli Funds listed the Gabelli Global Utility & Income Trust.
Also listing in 2004 were funds from BlackRock Inc.; Evergreen Investment Management Company, LLC; First Trust Advisors LP; Neuberger Berman LLC; and RMR Advisors Inc., each representing repeat business for the Exchange. Also this past year, Aberdeen Global Income Fund Inc. voluntarily delisted from the New York Stock Exchange in order to list on the Amex.
At the Amex
As reported above, the transaction transferring control of the Amex from the NASD to The Amex Membership Corporation closed on December 31, 2004, rendering the Amex an independent securities exchange once again.
Despite significant challenges over the past year, the Amex is poised to move ahead into a promising new era in which it is better positioned to compete more aggressively in its businesses.
Additionally, the Amex has developed a strong presence and awareness through the broadcast financial media and in 2004 increased the number of regular broadcasts that emanate from its trading floor facility, which air on WABC, CNBC, Bloomberg TV and other broadcast news networks and channels.
Going forward in 2005, the new ownership will elect a new board of governors within the first six months of this year. In January, Neal L. Wolkoff was named acting chief executive succeeding Salvatore F. Sodano in that post. Mr. Sodano, who on January 13, announced his intention to retire from the Amex in 2005, will continue as chairman to effect a smooth transition to senior leadership as determined by the new board.
