Candlestick Trading Blog

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The American Stock Exchange launched in 1842 and can be traced back to the colonial times when stock brokers created outdoor markets to trade new government securities. The stock hand signals were created as a result of curb brokers displaying lists of stocks for sale on Broad Street near Exchange Place.  It became so loud during the trading hours that hand signals had to be developed so that brokers could communicate effectively.  It was in 1921 that The American Stock Exchange was moved inside a building on 86 Trinity Place, Manhattan, where the hand signals are used to this day when trading stocks.  Trading still takes place in this location today and the building was declared a National Historic Landmark in the late 70’s.

The American Stock Exchange is the third largest stock exchange in the United States and manages 10% of all American trades.  It follows behind the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ). The AMEX in known for options trading, trading small cap stocks, and exchange traded funds and it lists companies from a wide variety of industries from companies of all different sizes. The American Stock Exchange trades more than 900 issues on its primary list and it trades options on 30 broad-based sector indexes.  The AMEX also trades more than 1,000 domestic and foreign stocks and is the primary marketplace in the U.S. for equities and derivative securities.   The AMEX is also known to have the least strict listing requirements of all three top American exchanges.  As a result of this, many small companies join this exchange.

The American Stock Exchange started as an alternative to the NYSE and is owned by the NASD (National Associate of Securities Dealers).  In 1998, the parent company of the NASDAQ purchased the AMEX and combined their markets while continuing to operate as separate entities.  Again, the AMEX is known for having the most liberal policies in the stock market regarding company listing and has a larger representation of stocks and bonds issued by smaller companies than the NYSE. The AMEX stemmed from brokers who started meeting on the curb outside of the NYSE to trade stock that did not meet the strict requirements of the Big Board. 

The American Stock Exchange is an auction market that specializes in trading and investing of structured securities and exchange-traded funds. The AMEX carries out is business on the trading floor through the use of brokers and specialists. Each security that is traded on the floor of the American Stock Exchange is handled by a specialist whose job is to conduct successful trading by bringing together buyers and sellers. This is performed to make certain that a fair market price is obtained from both parties. The specialist if also responsible for making sure that the market remains liquid through the buying and selling from the specialist’s own account. The broker’s job is to bring the orders to different specialists on behalf of their clients.

In the American Stock Exchange, “margin buying” is a common practice. The customer investing in stock pays part of the purchase price of his or her securities and then borrows the balance from his or her broker. The stock that the investor buys is used as collateral for the loan.  If the stock drops to the point where its value looks to potentially be inadequate to cover the loan, then both the investor and broker have an issue. The broker would then call for more margin funds in order to decrease the loan to a point comparable to the new, lower value of the stock. The broker might also sell him out if the customer is unable to meet the selling calls.

The American Stock Exchange provides continuous services to its clients, including luncheon seminars and conferences to provide access to thousands of retail brokers and stock portfolio managers. To be a company listed on the AMEX today means great visibility and analyst coverage, greater liquidity, and a strengthened tendency for major institutions to hold its shares.  The national recognition is also a benefit and is actually measured by the increase in the number of large brokerage firms holding shares for their accounts. The American Stock Exchange also provides a report that focuses on the different groups of listed companies. This report is issued bimonthly to provide information to investment professionals who are most likely playing the stock market.