"A 'one-size-fits-all' solution for public companies is neither feasible nor appropriate," Mr. Sodano said. Shares of what he calls Mainstream and Main Street businesses "need volatility protection and the price discovery mechanism of an auction market." He noted that more than 60 percent of companies listed on the American Stock Exchange, New York Stock Exchange, and Nasdaq National Market trade fewer than 100,000 shares per day.
Mr. Sodano reminded business leaders gathered at the Duquesne Club that small companies represent 99 percent of all United States employers, provide 75 percent of net new jobs and account for more than 90 percent of exporters - figures that are similar in developing economies such as China. Mr. Sodano said he believes to grow and prosper in a global marketplace, these small businesses - at the core of commerce and industry in most free economies and the prime producers of new jobs - need more attention from the broader financial community.
"During the past five years, we have seen some of the most stressful and unpredictable times in the capital markets in recent memory," Mr. Sodano said, citing the direct and indirect impact of the September 11 terrorist attacks, the damage to investor confidence from corporate and accounting scandals, and the restructuring of the markets themselves.
But the American Stock Exchange "has persevered and succeeded during these uncertain times," Mr. Sodano noted, "bolstered from our commitment to the small- and mid-cap companies that make our exchange their home." Mr. Sodano also pointed out the Amex Composite Index has consistently outperformed other major indexes, including the Dow Jones Industrial Average, Nasdaq Composite, and New York Stock Exchange Composite, during this period.
"We've created a diversified Amex, strengthening it through three strong core businesses," Mr. Sodano said. "We are a vital national marketplace for equities. We pioneered and continue to list exchange traded funds (ETFs), including familiar names such as SPDRs, tracking the S&P 500, and DIAMONDS, tracking the Dow Jones Industrial Average. We are also a market leader in closed-end funds and structured products, and have one of the largest options exchanges in the U.S., trading stock and index options."
Year-to-date through September 30, the Amex listed 66 companies, compared to 48 for this same period last year, which is a 38 percent improvement. The Amex also listed 20 exchange traded funds, 10 closed-end funds and 91 structured products. The Amex Composite Index (XAX) is up 8 percent during the first nine months of this year. The XAX was up 57% over the past three years and up 62% over the past five years, outperforming the Nasdaq Composite, New York Stock Exchange Composite, Dow Jones Industrial Average, Russell 2000, S&P 500 and Wilshire 5000 indexes during the same periods.
Continuing his discussion of the importance of helping smaller businesses deal with a global economy, Mr. Sodano said: "Mainstream and Main Street companies are not getting the attention they deserve, and I hope to see this change." Noting more aggressive interest in, and competition for larger cap listings, Mr. Sodano said he fears "small- and mid-cap companies often get ignored or squeezed."
Recognizing the specialist's role in a well-run auction market, Mr. Sodano spoke of their importance at the Amex. In an auction market, the specialist risks his or her own capital to moderate excessive price movements and volatility until buyers and sellers can meet directly. In most circumstances, this helps companies avoid the significant fluctuations in their securities that they often see on "over-the-counter" markets. "Our experience shows small- and mid-cap companies are better served if their shares get the more personalized attention of a specialist/auction market," he said.
Mr. Sodano further discussed the Amex long-term record of support for such companies, as they seek to raise equity capital and increase visibility with the investment community. "The Amex believes it is important for smaller organizations to create equity incentives for their key employees, while enabling founders to realize some liquidity besides the actual perspiration of their 'sweat equity.'"
He urged action from the broader investment community in support of smaller companies: "We believe to the extent that we can help, we're doing a pretty good job at the Amex, but it's in everyone's interest to support smaller businesses in ways that help them compete in the global economy."
