NEW YORK -- The American Stock Exchange moved to recapture its reputation as a breeding ground for fast-growth companies by opening a market yesterday for tiny companies, some of which don't qualify for listing on any of the commonly used trading systems.
The idea has been tried before by others and flopped. But this time the Amex says its Emerging Company Market, nicknamed the ECM, is rigorously screening new companies for growth prospects before they are permitted to list. Only 22 began trading yesterday, with a goal of 50 more by year's end.
At an opening ceremony yesterday at the New York headquarters of the 70-year-old exchange, Securities and Exchange Commission Chairman Richard Breeden rang the opening bell as hundreds of red, white and blue balloons streamed down onto a crowded trading floor.
"I think competition is good morning, noon and night, and this means competition to provide service for small investors and small companies," Mr. Breeden said. The market is being formed at the same time the commission is planning simplified registration and reporting requirements for small companies, he said.
"Through the ECM, some small companies should gain the visibility and research coverage they need to help develop a market for their securities," he said.
During its first half-century, the Amex was known as the incubator for firms entering the capital markets, giving them their first major-league exposure to investors before they grew large enough to join the New York Stock Exchange a few hundred feet away on the other side of a graveyard in Lower Manhattan.
Like the Big Board, the Amex is an auction market structured around trades being fed to a single point. Though the system is preferred by almost all major companies, the Amex, with its traditional membership of smaller companies, has seen its share of trading steadily wither since the formation in 1971 of the automated National Association of Securities Dealers market, based in Washington. The NASD electronically links transactions among hundreds of securities firms.
Within three years of the NASDAQ's formation it claimed its first victim, the National Stock Exchange in New York, which, much like the ECM, sought to trade in issues too small for the Amex. After years of fast growth, the NASDAQ now has 11 times Amex's daily volume and has begun to tread on the New York Stock Exchange's terrain.
About two-thirds of the companies listing yesterday traded on NASDAQ's regular system while the others traded over its electronic bulletin board, which has lower qualifying standards.
Fees for the initial group were waived and will be lower than for regular Amex companies, though slightly higher than for NASDAQ membership.
Yesterday, chief executives of the 22 new companies listing on the Amex said they decided to have their companies trade on the exchange to gain a prominence impossible on the vast NASDAQ system, which encompasses virtually every company with any equity at all.
"Out of 4,000 companies on NASDAQ it's hard to get seen," said Thomas Casey of Audre Inc., a California-based technology company designing software to allow computers to read visual information, such as maps and engineering drawings. "We were the No. 2 price gainer on the NASDAQ last year, and we didn't even get a phone call."
In trading yesterday, nearly 1 million shares in the newly listed companies changed hands, about 5 percent of the Amex's average daily volume. More than half the companies registered gains.