Highlights for the year included:
- Assets invested in Amex exchange traded funds up 21%, surpassing $100 billion;
- For the third consecutive year, the Amex Composite Index (XAX) outperformed that of every other domestic exchange and virtually all broad-based indexes;
- First fixed-income ETFs in the United States launched on the Amex;
- For 13% of the trading days in 2002, the Amex led the options industry in equity options volume;
- Closed-end fund listings raised more than $4 billion in assets;
- Structured products set fifth consecutive record-setting year, listing 117 new products;
- Next generation technology implemented, including NETS, a new proprietary technology trading platform, and TAO, the first exchange-marketed desktop product giving member firms the ability to execute trades at all five options exchanges
Equities & Closed-End Funds
The American Stock Exchange completed the year with 85 new closed-end fund and equity listings. The Amex set a record year in closed-end fund listings, surpassing the NYSE in total new fund listings for the second consecutive year. In 2002, the average daily volume of newly listed Amex companies increased by 58% over that of 2001.
The American Stock Exchange Composite Index (XAX) outperformed every other exchange composite index, and virtually every broad based index, for the third consecutive year. For the year, the Amex Composite Index closed 2.7% lower at 824.38, outperforming the New York Stock Exchange Composite Index down 19.8%; Nasdaq Composite Index down 31.5%; S&P 500 Index down 23.4%; Dow Jones 30 Industrials down 16.8%; and the Russell 2000 down 21.6%.
Over the last three years combined, the gap is even wider. While the Amex Composite Index managed to close lower by only 6% over the three year period, the New York Stock Exchange Composite Index was down 27.3%; the Nasdaq Composite Index down 67.2%; S&P 500 down 40.1%; Dow Jones 30 Industrials down 27.5%; and the Russell 2000 down 24.1%.
"The Amex's equity fund business is founded upon the unfaltering principle of providing unparalleled, value-added services to our companies," said Peter Quick, president of the American Stock Exchange. "The performance of our composite index over the last three years in a difficult economic climate demonstrates the strength and competitive advantages of our customized services and solutions."
The Amex also began trading Nasdaq securities in August. Today the Amex trades 135 Nasdaq-listed securities, creating new sources of liquidity and enabling traders and institutions to efficiently execute large orders of Nasdaq stocks at one price, a weakness of the current Nasdaq system.
Seven closed-end fund issuers joined the Amex in 2002 including: Nuveen Investments, Eaton Vance, BlackRock Funds, Neuberger Berman, Deutsche Asset Management-Scudder Investments, AEW Capital Management and U.S. Bancorp Asset Management. The issuers of the new funds raised over $4 billion in assets. The Amex lists a total of 126 closed-end funds with $12 billion in assets.
"This has been a distinctive year for closed-end funds at the Amex," said Thomas Rzepski, vice president of Amex ETFs. "In a competitive environment where issuers can choose among multiple listing venues, the Amex was able to distinguish itself by offering a notably more attractive cost structure and value-added services that deliver significant benefits and savings to the fund issuers and shareholders."
Options
Along with the rest of the options industry, the Amex experienced a slight decline in overall options trading for the year. Industry-wide, equity options volume was down 2%, and the Amex’s equity option volume declined 10%. The average daily volume of Amex options was down for the year with 738,332 contracts. The Amex traded a total of 186,059,672 contracts in 2002, down 9% from 205,103,884 in 2001.
Despite intense competition, the Amex defended its market position and on 13% of the trading days during the year had the industry’s highest market share in equity options volume.
The Amex also introduced new technology enhancements and developments to enhance trading speed and create new value-added initiatives. In October, the Amex partnered with First Traders Analytical Solutions to launch Total Access Options (TAO), the first exchange-marketed desktop product available to member firms with the ability to execute trades on all five options exchanges. TAO enables firms to execute trades on all five options exchanges from a single point on the desktop, dramatically increasing efficiency while driving Amex order flow growth. The Amex also introduced broker-dealer auto-execution and increased auto-execution size for options on the Nasdaq-100 Index Tracking StockSM, QQQ, as well as other popular stocks, significantly enhancing execution speed.
"With the introduction of innovative products such as TAO and by increasing the size of auto-execution orders, we continue to seek effective, workable ways to grow options volume in a challenging, competitive environment," commented Michael Bickford, senior vice president of Amex Options. "We remain confident in our ability, and even more resolute in the current environment, to ensure investors receive best execution on their orders, as evidenced in our launch of TAO."
Exchange Traded Funds
The American Stock Exchange further expanded its dominant role as the industry leader in exchange traded funds, setting several new milestones in 2002.
Assets in Amex-listed ETFs exceeded $100 billion for the first time, growing 21% for the year. Nine new ETFs were listed on the Exchange in 2002, giving the Amex a total of 122 of the 130 total ETFs listed domestically.
Building on its reputation as the global leader in the ETF segment, the Amex and its partner Barclay's Global Investors listed the first fixed-income ETFs to trade in the United States - the Fixed Income iShares. The Amex later listed four more fixed-income ETFs, called FITRS, with ETF Advisors. The Amex now lists a total of eight fixed-income ETFs.
"We continue to make strong progress against our strategic goals of leading the ETF segment through its next generation of innovation and development," said Cliff Weber, senior vice president of the Amex ETFs. "ETFs continue to grow in popularity as a cost effective, flexible alternative to traditional mutual funds. In fact, while traditional equity funds saw a net cash outflow, ETFs enjoyed a net cash inflow for the year. This is a strong indicator of the continued growth and popularity of one of our core products at the Amex." According to the Investment Company Institute, the net cash inflow for ETFs was $45 billion through the end of November 2002, while net cash outflow for equity funds was $20 billion.
Capital Markets
The American Stock Exchange had a fifth consecutive year of record-breaking growth, listing 117 new structured products in 2002, up 36% from 2001. The Amex currently trades 258 structured products, a 36% increase over the previous year 2001. Trading volume exceeded 215 million shares in 2002, the second highest annual volume ever recorded at the Amex.
"Our cost structure, excellent liquidity and trading environment are making the Amex an extremely attractive choice for sponsors of funds and structured products, and we will be emphasizing this part of our business as a key opportunity for strategic growth," said Richard Mikaliunas, senior vice president of Amex Capital Markets.
Next Generation Technology
In June, the Amex launched its new proprietary trading system, New Equity Trading System (NETS), which allows trading in any equity-based product in the United States regardless of which exchange a company or product is listed. "By streamlining the execution process and automating key components of the trading application, NETS delivers significant efficiencies to our customers. Customers now have speedier executions at the best possible price for a greater number of securities," said Ralph Rafaniello, executive vice president of Amex Market Operations.
The Amex introduced another core component of its technology platform in July with the launch of IDCE. IDCE, short for intra-day comparison for equities, was developed by Infosys Technologies Ltd, and is a comparison system for matching and settlement of the day's stock trades. "IDCE is a great operational development for the Amex and its customers," continued Ralph Rafaniello. "We are able to match trades during the day and transmit compared trades on a real time basis, providing our member firms with the ability to complete faster and more efficient transactions."
Continued progress was made in 2002 for the rollout of a new, fully electronic trading platform called ANTE, Amex New Trading Environment. "We are on track to implement ANTE in 2003, and remain very excited to introduce this great new system that will enhance the Amex platform, allowing the Amex to take advantage of both the speed of an electronic exchange and the benefits of an auction market," said Amex Executive Vice President and Chief Technology Officer Ravi Apte.
