What is the American Stock Exchange (AMEX)?
Brief answer: The American Stock Exchange is the historic U.S. exchange that evolved into today’s NYSE American. It began as informal curb trading in New York, became a formal exchange in the early 20th century, introduced several market innovations (notably options trading and the first exchange-traded fund), and now operates as a smaller‑volume, electronic market focused on small‑cap and growth companies.
Short definitions (first use)
– Stock exchange: a marketplace where shares of publicly traded companies are bought and sold.
– Options: derivative contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price before or on a set date.
– Exchange-traded fund (ETF): an investment fund that holds a basket of assets (for example, an index) and whose shares trade on an exchange like a stock.
– Market maker: a firm or individual that continuously offers to buy and sell a security, providing liquidity by quoting bid (buy) and ask (sell) prices.
– Market liquidity: how easily a security can be converted into cash without a big effect on its price.
Short historical timeline (rephrased)
– Late 1700s / 1800s: Brokers traded off‑floor (in coffeehouses and on sidewalks), earning the nickname “curbstone brokers.”
– Early 1900s: The curb trading community organized to introduce rules and a formal trading location.
– 1929: The informal curb market became a recognized exchange.
– 1953: The exchange adopted the name American Stock Exchange (AMEX).
– 1975: The exchange launched a formal options market.
– 1993: The exchange listed the first ETF.
– 2008 and after: NYSE Euronext acquired the AMEX; the venue was rebranded over time (NYSE Amex Equities, NYSE MKT) and is now called NYSE American. It operates as a fully electronic market with designated market makers.
Key characteristics and role today
– Innovation: Historically, the exchange introduced products that later became mainstream (options and ETFs).
– Listing niche: It has been a common listing venue for smaller, younger, and early‑stage companies that did not meet the stricter requirements of larger exchanges.
– Liquidity model: Because trading volumes are typically lower than on NYSE or Nasdaq, NYSE American relies on electronic designated market makers (specialized market makers with quoting obligations) to keep trading orderly and manageable.
– Market structure: The exchange operates electronically; market makers earn profits through the bid‑ask spread and related fees.
Practical checklist — what to look for when evaluating a NYSE American–listed security
1. Trading volume: check average daily volume to assess how easy it will be to enter or exit a position.
2. Bid‑ask spread: wider spreads imply higher implicit transaction costs for traders.
3. Presence of designated market maker: confirms that the listing has a party committed to quoting liquidity.
4. Company size and stage: expect more small‑cap and growth‑stage firms; research fundamentals and disclosure quality.
5. Volatility: smaller listings tend to show larger price swings; ensure this matches your risk tolerance.
6. Regulatory and listing standards: confirm the firm meets NYSE American listing requirements and review recent filings.
7. ETF alternatives: for exposure to a sector of small‑cap or growth companies, compare single-stock risk vs. ETF diversification.
Small worked example — how a market maker’s quoted spread affects transaction costs
Assumptions:
– Stock XYZ trades on NYSE American at a quoted bid of $9.95 and ask of $10.05.
– You buy 1,000 shares by taking the offer (market buy) and immediately sell them (market sell) back to the market maker.
Calculation:
1. Purchase cost = 1,000 × $10.05 = $10,050.
2. Sale proceeds = 1,000 × $9.95 = $9,950.
3. Round‑trip implicit cost = $10,050 − $9,950 = $100.
4. Cost per share = $100 / 1,000 = $0.10 (the bid‑ask spread).
Interpretation:
– The bid‑ask spread is an implicit trading cost paid to liquidity providers. For small‑cap listings with wider spreads, these costs can materially increase trading expenses.
– If the market maker executes many such share pairs, their gross revenue from the spread scales with volume (for example, 10,000 share round trips at $0.10 per share would be $1,000 before fees and inventory risk).
Notes on liquidity and market impact
– If average daily volume is low relative to your intended trade size, executing large orders can move the price. For example, trying to sell 50,000 shares in a market that averages 10,000 shares per day will likely depress the price and increase your realized costs.
– Designated market makers mitigate but do not eliminate market impact risk.
Why investors and issuers have used this exchange
– Issuers: Younger or smaller companies often list here because the standards and costs can be more compatible
Investors: access to small-cap exposure, ETFs and specialized products
– Exposure to smaller or earlier-stage companies. Exchanges that cater to smaller issuers tend to list names with higher growth potential—and higher risk and volatility—than large-cap exchanges. That can matter if you’re building a small‑cap or early‑stage allocation.
– Concentration of exchange-traded products (ETPs). Historically, this venue listed many ETFs and closed‑end funds; that makes it useful for investors seeking broad or niche exposures packaged as ETPs.
– Active market‑making and narrower displayed spreads for many tickers. Designated market makers and floor-based liquidity providers can tighten quoted spreads relative to over‑the‑counter trading in illiquid names.
– Options and derivatives access. Where option chains exist for a given underlying, investors can hedge or create income with standard option strategies.
– Trading hours, order types and execution venues. The exchange participates in the national market system, so order routing, intermarket linkages and standard U.S. trading hours apply; contrast these operational details with other exchanges when assessing execution quality.
Practical checklist for traders evaluating a specific ticker on this exchange
1. Liquidity metrics: check average daily volume (ADV) and quoted depth at the best bid and ask. If your trade size is > 10% of ADV, expect market impact.
2. Spread analysis: observe the typical bid–ask spread over several sessions; convert to a per-share cost and to a percent of midprice.
3. Market‑maker presence: identify whether a designated market maker or firm quotes the security consistently.
4. Order types: decide limit vs market orders. Use limit orders for thinly traded names to control execution price.
5. Transaction costs: add commissions, exchange fees and SEC fees to spread and slippage to compute expected round‑trip cost.
6. Slippage and impact test: execute a small “test” order and measure realized price vs midpoint to gauge real execution cost.
Worked numeric example — estimating total cost of selling a large block
Assumptions:
– Stock midprice = $5.00
– Average daily volume = 20,000 shares
– Your sell order = 5,000 shares (25% of ADV)
– Typical displayed spread = $0.06 (bid $4.97 / ask $5.03)
– Commission + exchange fees = $0.005 per share
Step 1 — Immediate spread cost if you cross the bid: you sell at roughly the bid, $4.97. Spread cost per share relative to midpoint = $5.00 − $4.97 = $0.03.
Step 2 — Impact/slippage estimate: large relative size often moves price further; assume 1% realized impact (conservative for this example): 1% of $5.00 = $0.05 extra per share.
Step 3 — Fees: $0.005 per share.
Total expected per‑share cost ≈ spread cost ($0.03) + impact ($0.05) + fees ($0.005) = $0.085.
Total expected cost for 5,000 shares = 5,000 × $0.085 = $425, or 1.7% of the notional ($25,000).
Notes: adjust the impact assumption up for lower depth or higher urgency.
Checklist for issuers thinking about listing here
– Purpose: clarify whether the goal is capital raising, liquidity for existing shareholders, or visibility.
– Eligibility: review the exchange’s minimums for market capitalization, shareholders, and corporate governance; standards are often lower than for the largest national exchanges but still binding.
– Costs and recurring requirements: estimate initial listing fees, annual fees, and ongoing disclosure/compliance costs (audits, SEC filings, investor relations).
– Liquidity support: secure commitments from market makers or designated liquidity providers to help maintain tradability at launch.
– Corporate governance: prepare required board and committee structures, investor communications and reporting controls.
– Timeline: plan for 3–6 months (variable) to meet documentation, regulatory review and market‑making setup.
Regulatory and historical notes (brief)
– The exchange historically focused on small‑cap issuers and ETFs and has undergone corporate and brand changes over time. Today, its operations are integrated into the larger national exchange ecosystem and subject to SEC oversight and national market rules.
– Trading on any U.S. exchange is regulated by the Securities and Exchange Commission (SEC) and self‑regulatory organizations (SROs) such as FINRA; issuers must also comply with SEC disclosure rules.
Key takeaways
– This venue can be attractive for issuers with lower initial listing thresholds and for investors seeking small‑cap or niche ETP exposure.
– Liquidity matters most: measure ADV, spreads and market‑maker activity before sizing trades.
– Use limit orders and staged executions to manage market impact when trading large blocks.
– Always factor spread, impact and fees together to estimate total trading cost.
Educational disclaimer
This is educational information, not personalized investment advice. I’m not suggesting you buy or sell any security
Practical checklists and worked examples
Investor pre‑trade checklist for thin/exchange‑specialty listings
– Confirm the venue: verify the security is listed on NYSE American (formerly AMEX) or another exchange.
– Measure liquidity: get Average Daily Volume (ADV) and current quoted spread. ADV = average shares traded per day (use 30‑ or 90‑day sample).
– Order size vs ADV: compute order size as a percentage of ADV (Order% = Order size / ADV). Above ~10–25% ADV, expect meaningful market impact; larger sizes need staged execution.
– Depth and market‑maker presence: look at order book depth and whether designated market makers (DMMs) or specialist firms are active.
– Execution plan: choose limit orders, time‑sliced algos (VWAP, TWAP) or dark‑pool execution depending on impact tolerance.
– Cost estimate: estimate spread cost, impact cost, and explicit fees together before execution (worked example below).
– Post‑trade review: compare execution price to benchmarks (arrival price, VWAP) and record slippage.
Issuer checklist for listing on NYSE American
– Confirm eligibility: review NYSE American initial listing standards (minimum shareholders, market cap, operating history or revenue/earnings tests).
– Prepare documentation: audited financials, registration statement if issuing public securities, corporate governance materials.
– Engage specialists: select legal counsel, transfer agent, and a market maker or designated liquidity provider.
– Apply and coordinate timing: submit listing application, agree on initial listing date and any quiet period communications.
– Ongoing obligations: maintain periodic SEC filings (10‑Q, 10‑K), comply with continued listing standards, pay listing fees.
– Plan investor relations: thin listings require proactive liquidity and communications to attract market interest.
Key definitions (short)
– Spread: difference between best ask and best bid prices.
– ADV (Average Daily Volume): mean shares traded per day over a specified lookback.
– Market impact: adverse price movement caused by submitting a trade relative to the pre‑trade price.
– Limit order: order to buy/sell at a specified price or better.
– Market order: immediate execution at the best available price; higher risk of poor fills on illiquid securities.
Worked numeric example — estimating total transaction cost
Assumptions:
– Stock price = $2.00 per share.
– Quoted spread = $0.10 (5% of price).
– ADV = 100,000 shares.
– Your order = 20,000 shares (20% of ADV).
– Expected market impact = 1% per 10% ADV (rule‑of‑thumb; impact scales nonlinearly). For 20% ADV, assume 2% impact.
– Commission and fees = $0.005 per share.
Step 1 — Spread cost (round‑trip)
– One‑way spread cost (crossing the spread) ~ half the spread as a percentage: 0.10/2 = $0.05 per share = 2.5% of price.
– Round‑trip spread cost = $0.10 per share = 5.0% of price.
Step 2 — Market‑impact cost (one‑way)
– Impact = 2% of price = 0.02 × $2.00 = $0.04 per share.
Step 3 — Explicit costs (round‑trip)
– Commissions/fees round‑trip = 2 × $0.005 = $0.01 per share.
Total estimated round‑trip cost per share = round‑trip spread + 2×impact? (depends on model); using conservative approach:
– Spread (round‑trip) = $0.10
– Impact (assume symmetric for buy+sell; round‑trip impact ≈ 2 × $0.04 = $0.08)
– Fees (round‑trip) = $0.01
Total = $0.10 + $0.08 + $0.01 = $0.19 per share = 9.5% of $2.00
Interpretation: For this small‑cap, thinly traded stock, trading costs can be a large percent of capital. Use limit orders, smaller lots, or execute over several days to reduce realized cost.
Simple formulas to keep handy
– Order% = Order size / ADV
– Spread% = Spread / Mid‑price
– Estimated cost% ≈ Spread% + Impact% + (Fees per share / Price)
Note: Market‑impact estimation is empirical; use broker algos or historical execution analytics for better calibration.
Execution tactics for large orders
– Time‑slicing: break into smaller child orders executed over time (TWAP = time‑weighted avg price; VWAP = volume‑weighted).
– Use limit orders or peg orders to mid or primary.
– Dark pools: may reduce visible footprint but watch for liquidity quality.
– Work with a broker or algorithmic execution desk to obtain real‑time liquidity metrics.
Risks specific to smaller/exchange‑specialty listings
– Wider spreads and high volatility.
– Lower depth — large orders move price materially.
– Potentially higher short‑interest and susceptibility to squeezes.
– Listing transfers or rule changes can affect trading behavior.
Short checklist for post‑trade evaluation
– Arrival price vs execution price — compute implementation shortfall.
– Compare executed VWAP to benchmark VWAP for the trade window.
– Record realized spread and impact to update future execution assumptions.
Educational disclaimer
This information is educational and illustrative only. It is not individualized investment advice or a recommendation to buy or sell any security. Execution outcomes vary; consult licensed brokers or advisors for tailored plans.
Sources
– Investopedia — “American Stock Exchange (AMEX)” (overview and history): https://www.investopedia.com/terms/a/amex.asp
– NYSE — “NYSE American” listing information: https://www.nyse.com/markets/nyse-american
– U.S. Securities and Exchange Commission (SEC) — investor and issuer rules: https://www.sec.gov
– Financial Industry Regulatory Authority (FINRA) — trading rules and market conduct: https://www.finra.org