Members Vote to Buy Back Amex
American Stock Exchange members voted to repurchase the marketplace from the National Assn. of Securities Dealers, ending five years of NASD ownership marked by profit declines and arguments over finances.
Eighty-two percent of 618 seat holders who voted approved the deal, which triggers a payment of $22 million by the NASD to Amex Chairman and Chief Executive Salvatore Sodano, 48. A judge two days ago dismissed a request by some exchange members to delay the vote.
The sale will further the NASD’s plan to focus on selling regulatory services to securities firms and shed ownership of markets, including the Nasdaq Stock Market. The deal requires dismissal of a class-action suit filed by Amex members, who claimed NASD and Amex managers reneged on pledges to spend as much as $215 million for computer technology and marketing.
“Like many acquisitions, this proved to be an unhappy marriage for both sides,” said Columbia University Law School professor John Coffee. “The bold vision of making the NASD, Nasdaq and Amex a worldwide force and market of markets never succeeded with floor members and probably slowed down Nasdaq. Running exchanges is a hard business in a competitive market.”
The NASD had threatened to foreclose on a $50-million loan made in 2002 and due at the end of April unless Amex seat owners accepted the deal.
To win approval, the NASD agreed to cut the debt in half if it was repaid within a year after the sale was completed and to provide Amex a seven-year, $25-million line of credit at 5% interest.
Amex, the third-biggest U.S. stock and options exchange, lost $7.3 million in 2003, $4.3 million in 2002 and $2.6 million in 2001, according to an offering memorandum sent to members.
The New York-based exchange in 1993 pioneered trading of exchange-traded funds such as the QQQ, which tracks the Nasdaq 100 Index, and they became its most profitable product. Amex’s market share of the funds fell to 21% last year from 25% in 2002. The exchange lists 555 stocks, compared with 2,500 on the New York Stock Exchange and more than 3,000 on Nasdaq.
