What Is the Difference between AMEX And NASDAQ

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The AMEX and NASDAQ are important exchanges that serve specific kinds of companies and investors. But in America, and the world, the New York Stock Exchange (NYSE) controls more of the market because so many of the biggest and most well-known companies are traded on it.

The American Stock Exchange and NASDAQ want to become one company. They believe they can better challenge the NYSE by pooling their resources.

Joining these two exchanges could blend the best of both worlds. Together, they could sell more shares-- potentially at fairer prices--than either could alone.

Under the proposed merger, the National Association of Securities Dealers would buy all 864 AMEX seats and run both exchanges, adding new electronic features. This would fuse two pricing styles into one company big enough to compete with the New York Stock Exchange (NYSE).

"The AMEX-style system, a lot of people believe, provides more efficient pricing," explains TLW Securities Steven Maurer, who develops trading software. "In a dealer market [like NASDAQ], pricing depends more on the number of dealers involved."

The merger promises an "electronic limit order book" to reduce spreads. The new features, plus the auction market's rapid back-and-forth, would improve NASDAQ's credibility and its appeal. Meanwhile, the AMEX hopes to coax investors away from the NYSE -- often called the "Big Board" because of its popularity-- as it did when it first formed in 1921.

What's In A Name?

So now, AMEX and NASDAQ are trying to form one company. The National Association of Securities Dealers would own both the NASDAQ system and the American Stock Exchange.

But it's not like a merger where Citicorp and Travelers start putting "Citigroup" on their stationery. The American Stock Exchange still will stand on lower Broadway and stocks still will trade on it, but another company will own it.

Under the merger, the AMEX will become a subsidiary of the NASD. In that sense, there will be one name for the company.

But the name for the auction market and the dealer market will both remain in use. These exchanges survive on member fees rather than the sale of goods, so the name is less of a concern.

Some brand names have a value just because of the name, though. Corporate strategists call this "brand equity" because they have been around for a long time and have a good reputation for quality with customers. Buyers in corporate mergers don't let these brands die. So when Britain's Grand Metropolitan bought Burger King, you didn't start seeing "Grand Metropolitan: Home of the Whopper."

The AMEX brand communicates an affordable, responsive, and responsible auction market, while the NASDAQ represents high technology in stock trading.

The federal government and two-thirds of each exchange's members still must approve the merger before it becomes official. If it does, the world may trade stocks with prices driven by an auction market's discipline and a high-tech market's speed.

Source:
http://www.pbs.org/newshour/on2/money/amex.html

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