Security exchanges "are organizations that facilitate trading of stocks and bonds among investors" (Gallagher & Andrew, 2003, p. 27). The American Stock Exchange (AMEX) is the third largest floor based stock exchange, making it a major U.S. marketplace for the trading of equities, bonds, options and derivative securities. AMEX is located in New York City and handles approximately 10% of all the securities traded in the U.S. Up until 1921, the AMEX was known as the "curb exchange". Shares of small and medium sized companies and index options account for a majority of the trading on the AMEX. In 1998, the AMEX merged with the National Association of Securities Dealers Automated Quotations (NASDAQ) (Investopedia.com, 2006).
Orders placed by customers on the AMEX are transferred to the trading floor electronically, where specialists who concentrate on specific securities match those orders to available bids or offers. Specialists may also handle "away from the market" orders in which an order is not put through until a specific market price has been reached (Commodity Research Group, n.d).
The NASDAQ was founded in 1971 as the world's first (and still largest) completely electronic stock market (USSEC, 2004). It is a computerized securities exchange that deals with over-the-counter stocks as well as some listed stocks. NASDAQ does not actually have a physical location, so trading is done primarily by use of computers and telephones. The NASDAQ trades larger and more active securities on their National Market and smaller, rising securities on their Small Caps Market. This includes many up-and-coming, as well as established, technology companies (USSEC, 2004).
When an order is placed for a security listed on the NASDAQ, a broker will electronically retrieve quotations for that specific security and the firm's trading desk will select the best quote and complete the...