And the Winner Is ... The OTC! OVER-THE-COUNTER VS. AMEX

THE day-to-day stock market slugfest between the American Stock Exchange (AMEX) and its chief rival, the NASDAQ listings of the National Association of Securities Dealers, may well be basically over, say a number of experts who monitor Wall Street. In terms of the total volume of shares traded, the number of companies listed by AMEX or carried on NASDAQ's over-the-counter listings, NASDAQ's advanced electronic-trading system, and the growing equal treatment of NASDAQ and AMEX-listed companies in many states, NASDAQ appears to be a clear winner in what had become an intense battle for market supremacy, according to experts such as Merton Miller, a professor of finance at the University of Chicago.

Not only that, says Dr. Miller, AMEX, which saw its net-earnings slip sharply last year, following the 1987 market crash, appears well on its way to being outclassed by aggressive regional stock exchanges, such as the Midwestern Stock Exchange, based in Chicago.

``They're a minor market,'' sniffs a NASDAQ official, referring to the American Stock Exchange. ``We're now more comparable to the New York Stock Exchange.''

``They've just got every company that doesn't qualify for listing on a stock exchange,'' retorts an AMEX booster, with a laugh. ``When we think of our American Stock Exchange, we think of `big fishes in a little pond.' A company on the AMEX has great visibility, and isn't going to get lost like they might over at the New York Stock Exchange. And there are important requirements for listing on the American Stock Exchange.''

Outwardly, of course, the two competitive stock listings couldn't be more different. The American Stock Exchange is primarily an auction exchange - a forum for bringing together buyers and sellers. And there is an actual physical setting where trading takes place, just as is the case with the giant New York Stock Exchange (NYSE). Moreover, AMEX has fairly stiff listing requirements for companies, including a pre-tax income of $750,000; 500,000 shares publicly traded; and stockholder equity of $4 million.

NASDAQ, by contrast, is an electronic trading system involving computer communication between dealers. There is no central trading floor as there is with the NYSE or AMEX. Indeed, the term NASDAQ means National Association of Securities Dealers Automated Quotations. Here, in the NASDAQ listing, is where one can find listings for stocks traded over the counter, not on any formal exchange. Financial requirements are modest to minimal for NASDAQ.

Still, NASDAQ's growth, particularly for that of its National Market System, has been remarkable in recent years. NASDAQ goes back to the early 1970s. AMEX has been around since 1842, under its predecessor organization, the New York Curb Exchange, and since 1953 under its current name.

``Anyone can easily read the trends,'' says Miller. Those trends, he says, definitely tend to run in favor of NASDAQ. ``AMEX is caught in the middle between the New York Stock Exchange and the strong Over The Counter market represented by NASDAQ. If you are a big company taking the trouble of listing, you go to the Big Board [the NYSE]. If you are a big company not willing to incur the expenses of listing, as some big companies are not, you go for NASDAQ.''

AMEX can point to such corporate giants as BAT Industries, Wang Labs, Texas Air, the New York Times, Washington Post, Texaco Canada, and Fruit of the Loom among those corporations listed on its exchange. But NASDAQ lists an equally impressive roster: MCI, Apple Computer, Intel, Telecommunications Inc., Nordstrom, Microsoft.

Indeed, some 2,200 of the companies listed on NASDAQ's National Market System (NMS, its main OTC listings) could technically list on the AMEX, based on financial requirements. And some 900 of the NMS listings meet the financial requirements for listing on the Big Board.

``AMEX is very strong in the options market,'' says Miller. ``But things don't stand still in this [financial] field.''

Miller argues that in some respects AMEX has even been overtaken by the Midwest Stock Exchange, based in Chicago.

``We see ourselves as very service oriented,'' says a spokesperson for the American Stock Exchange. AMEX, she notes, is the second-biggest options exchange, behind the Chicago Options Board. The American exchange has its own club, whereby company officials are brought together with brokers and other market watchers; it sponsors frequent conferences and symposiums, and maintains a large research program.

THAT said, NASDAQ continues to expand its National Market System. NMS companies have relatively equal standing with the AMEX and the NYSE, in terms of treatment under state securities registration laws, in some 25 states. Four states, Arkansas, Mississippi, Nebraska, and Massachusetts, recently exempted NMS-listed companies from their securities registration requirements. NASDAQ expects to have other states do so in the months ahead.

Under most state securities laws, companies that are listed on either of the two major exchanges, the NYSE or AMEX, are automatically allowed to sell securities. That has not been true, however, for the OTC companies unlisted on an exchange. And that explains why NASDAQ has made the drive for equality for its companies under state securities law - the so-called blue-skies laws - so important.

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