#182 - Quick Guide To The AMEX: American Stock Exchange

Episode of: The "Daily Call" From Option Alpha

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Mar 23, 20185m
182
#182 - Quick Guide To The AMEX: American Stock Exchange
Mar 23 '185m
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Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be doing a quick guide to the AMEX which is the American Stock Exchange and just giving you a little history on what it is and what it's come to be and who owns it now, basically. I think it actually has a very cool history when you start digging into some of these stock exchanges. It's just absolutely fascinating how these things came about naturally or organically back in the late 18th century and through the early 19th century. It's amazing actually. Right now though, the AMEX is the third largest exchange I think still by volume. It was acquired about 10 years ago I think by NYSE. And so, now, NYSE basically owns it, but there's still a lot of things that are traded on the AMEX. It does a lot of small cap and mid cap, a lot of ETFs. A lot of derivatives still get traded on AMEX. When you actually route your orders through any broker platform like Thinkorswim or Tastyworks or Interactive Brokers, they can still get routed through the AMEX if you do best fill. You could actually in most platforms, designate where you want the order to go to and in some cases, if you want it to go to AMEX, you could. But usually, you just do best fill or it’s done best fill on the backend.

The history of it through is actually crazy. The AMEX used to be or I guess where it came out of was what's called curbstone brokers. Back in the early 1900s, even probably before the 1900s, there were traders in the streets who were known as curbstone brokers that really would specialize in some of these emerging market or small companies and people would literally trade in the streets. They would be railroad guys and oil guys there and they would trade with one another literally in the streets over this. And of course, naturally, that was insanely disorganized. There was no regulations, no standard of contract size. It was just a free-for-all. But this was really the early days of these markets and these exchanges developing or maturing from something else. Then later on, they organized themselves into this New York… What it was called, the New York Curve Market Agency which was again, just an agency of brokers and traders basically who decided to have their own rules and regulations and framework around trading practices. But then later in the 1930s, they became actually the New York Curve Exchange. They actually adopted a totally new set of principles, they had an actual trading floor, they started actually trading on a much larger scale, billions of dollars even at that point and they started to become a lot more sophisticated which eventually got changed. I think in the 1950s or 1960s, maybe officially to the AMEX and started trading in that space.

It’s actually a crazy history that's taken almost maybe like 70, 80 years or so to actually get to the AMEX from its original roots. If you actually do a lot of reading, there’s a lot of research papers out there and a lot of good old historical articles on these curbstone brokers. It’s just crazy what they would do and how far they would travel with all their stock tickets and their stock receipts and everything every single day. It’s actually amazing. Maybe we’re going to be the curbstone brokers or the curbstone traders to automated trading in the future. People are going to look back and be like, “I can't believe that people actually used to click and choose and make decisions with their mouse and with their brains versus making it mostly automated through bots.” Maybe that's what we’ll be in the future.

I think the coolest thing though about the AMEX is that it was the original place where the S&P 500, the spider index was actually introduced. It was actually the original place where that ETF was actually traded. I think it was 1993 when it was originally traded on the AMEX which was crazy. That was maybe the beginning. They could definitely be seen as the very, very beginning, godfather of index ETF trading or that kind of avenue that the markets have gone since then which is absolutely completely blown up. I do all the ETFs that are out there now and how we can trade options on them. But they were the first pioneers in that venture. As always, hopefully it’s good to just get a little history on where things have come and again, another little perspective that's not necessarily so options specific, focused on strategies and techniques and adjustments. But a little bit of history I think is always important and helpful. If you guys have any other questions about other things that we can go over and other history events or other exchanges or general market questions, I'd love to know. Let me know at optionalpha.com/ask where you can leave me a message and leave me a recording. Those always get first priority in the daily call, so if you want your question asked, get it there at optionalpha.com/ask. Until next time, happy trading!

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