Amex Seeks to Challenge NASDAQ : Markets: The ailing American exchange proposes new guidelines. Its share of stock trading volume fell to 4% while rival’s share grew to 44%.

The ailing American Stock Exchange has proposed a new set of lower monetary guidelines for smaller companies that would put the Amex in head-to-head competition with the NASDAQ over-the-counter market, the thriving breeding ground for young, less financially secure companies.

The new guidelines, proposed last month by the Amex, are subject to Securities and Exchange Commission approval, which the Amex hopes to win by early next year. If approved, a second tier of Amex stocks, to be called the “emerging company marketplace,” would be listed separately in newspaper stock tables and would serve as an incubator for companies that would hope to eventually qualify for regular Amex listings.

The Amex proposal comes at a time of financial decline for the exchange. From 1980 to 1990, the Amex’s share of total stock trading volume in the U.S. fell from 8% to 4%. And as the number of stocks trading on the Amex has declined, so have the fees it collects. In the first half of this year, Amex lost $192,000, compared with a year-earlier profit of $1.3 million.

Meanwhile, NASDAQ’s share of trading volume grew to 44% in 1990 from 34% in 1980 and it now has more than 4,000 stocks trading on its system, compared with about 1,000 on the Amex.

Given that Amex handles only one-tenth the stock trades that NASDAQ does, would the proposed Amex guidelines create a rush among NASDAQ-listed companies to join its beleaguered rival?

That is doubtful, judging from the response of local companies whose stocks now trade on NASDAQ.

“I don’t know why we would consider going to that marketplace,” said James R. Schwartz, chief executive of Bishop Inc., an Agoura Hills supplier of design and engineering equipment whose stock has traded on NASDAQ for more than a decade. “The NASDAQ is a very efficient market.”

The Amex “doesn’t have anything to offer us,” said Christopher Ebert, chief financial officer of Trio-Tech International Inc., a San Fernando maker of semiconductor testing equipment.

And executives at SFE Technologies, a San Fernando electronics company that was delisted from NASDAQ in April because it didn’t meet several financial criteria, are still NASDAQ admirers. Emmett Bradley, a management consultant who was brought in to help SFE stage a turnaround, said his chief concern is getting the company back on firm footing. If and when that is achieved, he said, SFE plans to reapply for listing on NASDAQ.

“We have no interest in” a possible Amex listing, Bradley said. “We were quite satisfied with NASDAQ,” he said, because it has a strong orientation toward small stocks.

Dan Pasquini, president of Fortune Petroleum Corp., an Agoura Hills energy concern that trades on NASDAQ, said he has little interest in another market for small stocks. “My feeling is if we get big enough we’d want to go straight to the big board (New York Stock Exchange) and skip right over the Amex,” Pasquini said.

For many the Amex has become the forgotten stock exchange because of the vast momentum of NASDAQ, which was founded just two decades ago. NASDAQ has flourished in part because of its system of trading stocks via computer--as opposed to the New York Stock Exchange and the Amex where actual trades are made auction-style by traders on the floor of the exchanges. And while NASDAQ is still perceived as the home of small stocks, in the 1980s it attracted more attention from institutional investors when some of its stocks, such as Apple Computer, Microsoft and MCI Communications, developed into high-profile companies.

The Amex’s proposed guidelines for companies not now listed on NASDAQ are practically identical to NASDAQ’s entry requirements. A company would qualify for the Amex’s new marketplace if its asset value exceeds $4 million, its net worth (assets minus debts) is more than $2 million, and it has a minimum stock price of $3 a share. The standards for companies now listed on NASDAQ that want to switch to the Amex are even lower: a $2-million asset value, $1-million net worth and a $1-a-share stock price.

By comparison, a company must have a $4-million net worth and $3-a-share stock price to qualify for a regular Amex listing. Even if a company doesn’t meet the lower financial standards it still might be allowed on the exchange if a special committee decides its growth prospects are favorable.

Amex spokesman Bob Shabazian maintained that companies would be attracted to the Amex under the new guidelines because of its auction-style market. By contrast, NASDAQ trades are operated through a dealer system, in which so-called market makers act as middlemen in the buying and selling of stocks.

The Amex contends that the auction market benefits companies and investors by eliminating the middlemen and providing narrower spreads between bid and asked prices for stocks. Moreover, Shabazian said, the Amex offers companies greater exposure because some lower-level NASDAQ stocks are often not even listed in newspaper stock tables.

Amex officials also plan to use as a selling point the exchange’s tighter regulations governing short sales. A short sale is when an investor borrows stock, sells it and hopes the price declines so he can buy it back, pocket the difference and return it to the original owner. A lot of short-selling activity in a stock is seen as a negative sign, and small companies are considered particularly vulnerable.

And some local small-company executives prefer the Amex to the NASDAQ system. “Better exposure” is the reason cited by Harvey Lenkin, president of Public Storage Advisers Inc. in Glendale for listing 18 Public Storage-affiliated real estate investment trusts on the Amex.

Gregory S. Grabar, manager of administration at Benton Oil & Gas Co., an Oxnard-based energy company, said Benton switched from NASDAQ to the Amex last May because of the stricter rules on short sales, the narrower price spreads and “better communication” in the auction market.

“We have the ability to go directly to the specialist and find out what is happening in our stock,” Grabar said. “You can’t get that with several different market makers” on NASDAQ.

Some NASDAQ companies now have another reason for considering switching to the Amex, said Walter Carucci, president of Carr Securities, a New York firm that makes markets in over-the-counter stocks: Many fear delisting because NASDAQ recently adopted more stringent financial requirements in an attempt to improve its image and flush out low-priced “penny stocks.”

If a company is kicked off the NASDAQ system, it would be easier to qualify for an Amex listing under the proposed emerging company guidelines than it would to qualify for relisting on NASDAQ.

But Robert Ferri, a NASDAQ spokesman, said NASDAQ doesn’t fear the Amex’s attempt to muscle in on its turf. Even without the looser standards, almost two-thirds of NASDAQ’s stocks already qualify for a regular Amex listing, Ferri said. Yet NASDAQ loses only 2% of its companies each year on average, he said, and most of those go to the New York Stock Exchange, not the Amex.

“You wonder if the Amex is fighting the last war,” Ferri said.