- An agreement in principle was reached for GTCR Golder Rauner, LLC, a leading private equity firm, to acquire the Amex from the NASD.
- The Amex Composite Index continued its strong performance, increasing 18% during the period.
- The Amex added significantly to its growing closed-end funds business, listing one of the largest IPOs of a closed-end fund ever brought to market on May 28.
GTCR Agreement
On June 2, the NASD announced that it had reached a preliminary agreement to sell its ownership interest in the American Stock Exchange to GTCR, Golder Rauner, LLC, a leading private equity firm based in Chicago. Details of the agreement are currently being finalized, and the entire transaction is subject to various approvals, including the Amex membership and the U.S. Securities and Exchange Commission.
"The partnership with GTCR will allow us to focus on significant growth opportunities, leveraging our proven ability in creating innovative new products, and continuing to build on the strength of our marketplace by exploiting strategic growth opportunities in our existing diversified product mix," said Mr. Sodano. "Resolving our ownership situation in such a positive fashion squarely positions the Amex to assume a leadership role in the rapidly evolving and changing landscape of the financial markets."
Equities
In the first half of 2003, the Amex listed 31 new companies, more than any other marketplace, including the New York Stock Exchange, Nasdaq National Market and Nasdaq Small Cap Market. The average daily volume of Amex-listed companies was up 16% as of the end of June 2003 as compared to the same time period in 2002. The Amex also set an all-time high for trading volume in equity listings in June 2003, with 40.8 million shares traded daily, inclusive of capital market and closed-end fund products.
The American Stock Exchange Composite Index (XAX) has continued to outperform nearly every other exchange composite index, and virtually every broad based index. For the first half of 2003, the Amex Composite Index closed 18% higher, outperforming the New York Stock Exchange Composite Index, up 10%; S&P 500 Index, up 11%; Dow Jones Industrial, up 8%; and the Russell 2000, up 17%.
Options
The Amex options marketplace continued to feel the pressures of an increasingly competitive business environment and market issues like payment for order flow. For the first six months of 2003, Amex options volume was 717,766 contracts per day versus 776,021 during the first half of 2002, a decrease of 7.51%. Amex equity options market share was 22.86%, compared to 26.97% during the same period in 2002.
On May 29, the Amex announced that it was re-instituting payment for order flow, the practice in which order flow providers are paid to direct their orders to a particular exchange for execution. The Amex re-instituted payment for order flow as a response to competitive measures, and only after every other competitor in the market place had done the same. In reinstating its program, Amex Chairman and CEO Salvatore Sodano called on the SEC to take immediate action to ban the practice.
"The practice of payment for order flow flies in the face of best execution requirements and leaves investors at risk by exposing them to possible conflicts of interest," said Mr. Sodano. "While we have acted in this case to protect against an unfair competitive advantage, we remain as convinced as ever that this practice should be banned outright."
Since the launch of Total Access Options, TAOTM, the first exchange-marketed desktop product available to member firms with the ability to execute trades on all options exchanges, in late 2002, the Amex has deployed more than 42 TAO applications to customers. "TAO is another innovative example of the Amex meeting the challenges of a competitive environment, delivering value to options traders by decreasing execution times and costs for options traders," said Mr. Sodano.
Listing more exchange traded funds (ETFs) and HOLDRS than any other U.S. based exchange, the American Stock Exchange continues to be a leading product innovator and venue of choice among ETF issuers. The Amex has listed five new ETFs year-to-date, for a total of 123 ETFs of the 131 total ETFs listed domestically. The composite volume of ETFs was up 16% in the first half of 2003 as compared to the same time period in 2002. Total assets invested in Amex ETFs have grown to over $120 billion, up 20% for the year. The average daily volume of Amex listed ETFs and HOLDRS is 37 million shares as of June 2003. Ten years ago, the Amex pioneered the concept of ETFs in the U.S. with the introduction of trading in the SPDRs - Standard & Poor's Depositary Receipts®, and this year listed a new ETF that offers investors a new way to invest in the stocks of the S&P 500. In April, the Amex began trading the Rydex S&P Equal Weight ETF, a new equally weighted S&P ETF based on the S&P Equal Weight Index, an index co-developed by Rydex Global Advisors and Standard & Poor's. The Amex continues to look to the next level of ETF innovation with the introduction of leveraged ETFs later this year. Closed-End Funds Building on its success over the last few years, the Amex continues to make strong advances in the closed-end fund segment. In the first six months of the year, the Amex listed eight new closed-end funds with a market capitalization of more than $4 billion. In May, the Amex listed the Eaton Vance Limited Duration Income Fund, one of the largest initial public offerings of a listed closed-end fund. During the period, the Amex welcomed three new closed-end fund issuers: Cornerstone Advisors, Evergreen Investments and First Trust Advisors L.P. "The gains we continue to make in the closed-end fund segment are a direct result of the operational efficiencies we have achieved in the last few years, as well as the excellent liquidity on our floor and superior customer service. Combined with attractive listing fees, together these attributes have made the Amex the venue of choice for both new and existing issuers," said Mr. Sodano. Capital Markets In the first half of 2003, the American Stock Exchange listed 51 new structured products. The Amex currently trades a total of 271 structured products, a 14% increase over the same time period for 2002. "The Amex's trading environment, in combination with the liquidity on our trading floor and competitive cost structure, continues to make the Amex an attractive choice for sponsors of structured products," said Mr. Sodano. The Amex welcomed two new issuers in the first half of the year: Credit Suisse First Boston and Wachovia Corporation.
