American Stock Exchange May Soon Be Public

Stock Tickers: NYX, NDAQ, NMX, ICE, CME

The American Stock Exchange has been a laggard in the close nit exchange circles for longer than most could think of and it hasn’t been very well thought of, but that might not be the case for much longer.  The company has announced that its board of governors and the Membership Corporation have appointed Morgan Stanley to advise it on demutualizing and for "potential strategic future initiatives."

That is indicative of only one of two things: IPO or Sale, with an IPO as the most likely scenario. Everyone thinks of the AMEX as the red-headed step child in the stock exchange world, but if you haven’t been reading up on developments then be advised that isn’t your uncle’s AMEX.  The technology is not as far behind as it once was, and because it has fewer listing than NASDAQ or NYSE it is a much more manageable exchange.  They now have more than 200 ETF listings on the exchange and is home to many closed-end funds.  The listing requirements are more accomodative to emerging companies, and the listing costs are much more reasonable than at the NYSE.   Even though the options business has changed rapidly and gone largely electronic, this is still one of the options hubs in the U.S.

With the huge price increases seen in shares of NYSE (NYX), with the meteoric rise of the CME (CME), the 400% rise in NASDAQ (NDAQ) shares in the last two-plus years, the rise of InterContinental Exchange (ICE), the premium open for NYMEX (NMX), and the international mergers of exchanges….it is different than in the past.

All that you can really say on this is, "It’s about time."  This is not the same AMEX that it was when it parted ways with NASDAQ.  It is likely that the media will point out of more of the old negative stories about the exchange for some time.  After all, it’s easier to be negative in the media than it is positive and you get more readers for being a nay-sayer.  Despite the past, you don’t have to have the name "Dr. Pangloss" to see the good here.  That’s my take on it.

There has been something in the works for a while, so it might not be the biggest surprise in the world.  This is still going to be one to watch.  A seat on the Exchange last sold for $400,000 and the indicated market for a seat is $365K X $400K.  One trader I speak with regularly said that seats were under $200,000.00 as recently as last year.

Jon C. Ogg

January 25, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.