Highlights include:
- The American Stock Exchange Composite (XAX) outperformed all other indices for the first half of 2002, making it the third consecutive year of outpacing all other broad-based exchange indexes.
- There were 22 new company listings on the Amex, surpassing the Nasdaq Small Cap Market's equity listings during the same period.
- Final stages for impending trading of Nasdaq-listed stocks under unlisted trading privileges.
- Launch of next generation technologies and fund products, including a new proprietary technology trading platform (NETS) and a new category of exchange traded funds (ETFs).
The American Stock Exchange Composite Index (XAX) was the only broad-based exchange index to post positive gains, with a 5.35% increase for the first six months of 2002, outperforming negative gains from the New York Stock Exchange Composite Index (-9.62%), Nasdaq Composite Index (-24.98%), S&P 500 (-13.79%) and Dow Jones 30 Industrials (-7.77%), as well as the Russell 3000 (-12.85%) and Wilshire 5000 (-12.36%) indices during the same period.
"The quiet but continued success of the Amex, and the NASD's goal to focus solely on their role as a regulator, continues to generate interest in the future plans of the Amex," commented Sodano. "To lay the groundwork for our eventual independence, we continue to work closely with the NASD, and with Credit Suisse First Boston, to determine the best course of action for the future of the American Stock Exchange, our customers, and our members and seat owners."
Equities
Despite a challenging economic climate, the Amex listed 22 new companies during the first six months, surpassing the comparable market in Nasdaq in terms of equity listings. Furthermore, average daily volume in Amex equities increased 23% over the same period in 2001.
"We're seeing the results of communicating the Amex advantage to middle market companies," said Peter Quick, president of the Amex. "Especially in the current economic climate, more companies realize the competitive benefit of our highly customized solutions and dedicated services, such as the Amex IR Alliance, where we provide investor relations services to our listed companies. The distinctive quality of the Amex marketplace is reflected in the success of our Composite Index."
Nasdaq UTP Trading Program
The Amex plans to begin trading Nasdaq securities on an unlisted trading privileges (UTP) basis beginning in the third quarter of 2002. Nasdaq stocks will be traded under the auction market system of the American Stock Exchange, with each individual stock allocated to a single specialist firm. Six specialist firms were selected to participate in Phase One of the program:
- Bear Hunter Structured Products (a subsidiary of Bear Wagner Specialists LLC)
- Cohen, Duffy, McGowan (a subsidiary of Van der Moolen Holding NV)
- Equitec Specialists LLC
- Griffen Securities LLP (a newly created affiliate of Jefferies Group)
- Performance Capital Group LLC (a new entrant from the New York Stock Exchange)
- Susquehanna International Group
"Decimalization and reduced spreads have dramatically changed the economics of trading Nasdaq stocks. The Amex's agency trading system, combined with its strong organization of equity and derivatives traders, will provide a competitive platform for trading Nasdaq stocks," said Brett Redfearn, senior vice president of Equity Business Strategy and Order Flow.
Offering Nasdaq-listed securities on the Amex will enable traders and institutions to execute large blocks of Nasdaq stocks at one price. Investors will have the ability to trade Nasdaq stocks electronically or through an Amex floor broker. This initiative creates new trading efficiencies and new sources of liquidity and will enable investors to realize the best possible price via the Amex auction market structure.
Options
In the face of an overall industry drop in options trading, for the first time in its history the Amex exceeded the Chicago Board Options Exchange in equity options volume, topping them on 23 separate days, with an average daily volume of 776,021 contracts. The Amex outdistanced the CBOE on a weekly basis for four weeks during the first six months of this year with an average weekly volume of 3,880,104 contracts. According to the Options Clearing Corporation, total volume for equity and index options through June 30, 2002 declined 8.8%, to 383,246,442 contracts. In concert with the industry decline in volume, the Amex incurred an 18.37% decline in average daily volume.
"Although we've had some challenges in comparison to last year, they are reflective of the options marketplace as a whole," remarked Michael Bickford, senior vice president of Options. "We've sought to address some of these challenges through upgrades in our system, including an expansion of auto-execution orders."
Earlier this year, the Amex expanded auto-execution orders through the Amex system to up to 1,000 contracts on the Nasdaq-100 tracking stock, QQQ, as well as an increase of up to 250 contracts for options on such popular stocks as Microsoft, General Electric, Intel and Motorola, among others.
Exchange Traded Funds (ETFs)
The Amex ETF Marketplace kicked off the year by hosting a highly popular and successful ETF Symposium in January titled, "A Definitive Exploration of ETFs." Among a crowded audience of investment advisers, institutions, broker-dealers and other investment professionals, the Amex revealed the results of two comprehensive studies on ETFs, detailing strong future retail growth prospects for the product.
Also at the beginning of the year, the Amex launched trading in the second of an expected series of ETF offerings from Vanguard. The Vanguard Extended Market VIPERS (Vanguard Index Participation Equity Receipts) is based on the Wilshire 4500 Completion Index.
With approval from the Securities and Exchange Commission (SEC) in May, the Amex began preparations for the launch of a new category of funds, fixed-income ETFs. On July 26, the Amex will begin trading four new fixed-income ETFs provided by Barclays Global Investors: iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 20+ Year Treasury Bond Fund and iShares GS $ InvesTop Corporate Bond Fund. These four iShares bring the total number of BGI ETFs listed on the Amex to 79.
In further support for new categories of ETFs, earlier this year the Amex filed comments with the SEC in response to a concept release concerning actively-managed ETFs. Copies of the Amex's comments can be read on the SEC's website, www.sec.gov.
Total trade volume of ETFs grew 44.3% from June 30 of last year. ETF assets grew 16.2% from a year ago to over $92 billion, compared to the 19% decline in the S&P 500 over the same time period.
"The Amex has clearly established itself as the leader in the ETF industry," said Cliff Weber, senior vice president of the Amex ETF Marketplace. "We currently list 117 of the 119 ETFs listed in the United States, with more on the way. With the continued expansion of ETF products at the Amex, we are able to offer investors additional product diversification and investment opportunities."
Closed-End Funds
The Amex has also been aggressively pursuing the listing of new closed-end funds. Over the first six months of the year the Amex listed 11 new closed-end funds, all of which were municipal bond funds, at a rate that is on par with last year's pace for the same time period. The new listings bring the total number of closed-end funds listed on the Amex to 95. A strong pipeline of new closed-end fund listings is expected to continue in the second half of the year.
Capital Markets
Amex's Capital Markets group is heading towards a fifth consecutive year of record-breaking growth, listing 69 structured products during the first six months of 2002. This is a 50% increase from last year's pace for the same time period.
Next Generation Technology
The Amex recently launched its new proprietary trading system, New Equity Trading System (NETS), which allows trading in any equity-based product in the U.S., regardless of which exchange a company or product is listed. The new point-and-click system allows for the trading of all equities and the ability to trade the underlying stock in an option via unlisted trading privileges. Working with technology partners OM and the Securities Industry Automation Corp. to build the new platform, NETS' roots were derived from the Amex's original Option Display Book system, AODB. Specialists move from a keyboard-driven, point-of-sale transaction to the speedier point-and-click function.
"With the implementation of NETS, we've further enhanced our ability to offer our specialists and customers more diversification and better service," said Ralph Rafaniello, executive vice president of Amex Market Operations. "Customers can now trade any equity-based product in the U.S., with new technological enhancements for even faster executions."
