American Stock Exchange (AMEX)

The predecessor of NYSE American

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What is the American Stock Exchange (AMEX)?

The American Stock Exchange (AMEX) started operations in 1908 as the New York Curb Market Agency. The AMEX was originally composed of traders and brokers that would get together to buy and sell stocks at an open location in New York City. It was a self-regulated and very rudimentary market, where most transactions were done by shouting.

American Stock Exchange (AMEX)

The market became more structured with time and, in 1921, became the New York Curb Exchange, which was a co-operatively owned by its members. The change brought more rules to the exchange, but it remained relatively unorganized. The exchange continued to operate outside until 1921 when it moved into a building in Lower Manhattan.

The exchange took its modern form in 1953 when it was named the American Stock Exchange (AMEX).

The Res Scandal

Even after its modernization, the AMEX was not free from problems. In 1962, its reputation was badly tarnished by a major controversy called the Res scandal. The father-son duo of Gerard A. Re and Gerard F. Re, collectively known as the Res, were at the core of the scandal. Both were AMEX specialists who abused the rules of the exchange to indulge in all kinds of market malpractices.

For example, they would buy the stock of unregistered companies directly from insiders then sell them to the public. To accomplish this, they would bribe brokers to push certain stocks or use dummy accounts to purchase a large amount of stock to artificially increase the prices. They also used their network company management to access insider information and trade on it.

The scandal went on from 1954 until 1962 when investigations by the SEC found evidence of widespread market manipulation. The scandal cost the public $10 million in losses, which was a very large amount in the 1960s.

Revival and Modernization

In the aftermath of the Res scandal, the AMEX underwent several changes. Paul Kolton, formerly of the New York Stock Exchange (NYSE), joined AMEX as its executive vice president. Under Kolton’s leadership, AMEX was able to recover from the scandal and grew to become the second-largest exchange in the United States. He also introduced options trading on the exchange and went on to become the president of AMEX in 1971. He served as the CEO of AMEX until 1977 when he retired.

Kolton was succeeded by Thomas Peterffy, who introduced essential technical reforms, such as electronic trading to the exchange. Peterffy later went on to establish the well-known electronic trading platform, Interactive Brokers. During Peterffy’s tenure, AMEX was considered one of the best trading venues in America.

Merger with the NYSE

In October 2008, the NYSE Euronext group acquired AMEX for $260 million. Under the NYSE, it went through many rebranding exercises. It was first rebranded as NYSE Alternext U.S. upon acquisition. It became the venue for small-cap stocks, much like the Vancouver Stock Exchange (VSE), after its merger with TMX Group.

In 2009, it was rebranded as NYSE Amex Equities – probably as a way to use the brand value that AMEX originally built for itself beginning in the 1960s. Again, in 2012, it was rebranded as NYSE Market.

The last rebranding took place in 2017 when it was renamed as NYSE American. NYSE used AMEX or NYSE American as a competitor to a new exchange called IEX. The IEX was set up to address some of the problems in high-frequency trading, such as front-running orders and misuse of complex order types.

To counter such practices, IEX introduced a secular delay of 320 microseconds to all orders. NYSE American offered a 350-microsecond speed bump in electronic trading in line with IEX, which pioneered the technique.

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