The Other Exchange

On the American Stock Exchange last week, the frenetic trading almost swamped the tickers. In one day, trading boiled to 3,520,000 shares, highest since 1929 and equal to 93% of that day's volume on the New York Stock Exchange. So far this year, volume has equaled 53% of the New York Stock Exchange's, v. 32% last year. Unable to keep pace with the new popularity, the AmEx tape often trails five, ten, even 25 minutes behind. Its nearly 1,300 tickers, which transmit prices to 215 cities, print only 300 characters a minute. But able AmEx President Edward ("Ted") McCormick, 49, a onetime SECommissioner who has brought the AmEx a long stride toward maturity since he came in eight years ago, plans soon to modernize by installing 500-character-a-minute machines.

In with the Young. Why the trading avalanche? The bull market has attracted many novice investors who aim for the moon but set a $10 limit on the trip. They shun stocks that sell for more, which means virtually all those on the New York Stock Exchange. They figure, often wrongly, that low-priced stocks are not only the cheapest but will rise the fastest. Thus, they shop around the American Exchange, home of many a budget-priced, volatile issue. (Almost all the exchange's most active stocks last week sold below $4.) Many of the stocks are low because young companies go on the AmEx; its rules for listing are easier than the Big Board's. The New York Stock Exchange insists that a firm have earnings of at least $1,000,000, plus 400,000 shares outstanding and 1,500 stockholders. The AmEx requires no earnings minimum, only 100,000 shares and 500 stockholders. When a company's stock supply is thin, it can jump up and down fast on trading swings.

Yearling companies often go on the AmEx for "seasoning," hope to graduate to the New York Exchange. Last week, for example, Desilu Productions Inc., of TV's Desi Arnaz and Lucille Ball, joined the AmEx ranks. Even after they grow big and strong, some companies prefer to stay on the AmEx because it requires fewer financial reports, permits nonvoting stock to be listed.

Out with the Old. Despite its frenzied week, the AmEx (the New York Curb Exchange until 1953) has mellowed since its raucous youth. From its founding, around 1850, until 1921, the exchange operated outdoors, as a noisy swarm of brokers and traders crowded Wall, Broad and Hanover Streets from 8 a.m. to sunset, in fair weather and foul. Because trading was done by flashing secret hand signals, whistling and shouting, the marks of a star broker were leathery lungs, a weatherproof body, and a canny ability to decode competitors' signals.

Gone are those bad old days. But some stocks have swung so widely on the AmEx this year that President McCormick is worried that tipsters and touters have been boosting some stocks. "No one should buy on market averages alone," warns McCormick. "Neither should one buy a security simply because its price has been rising or because it has a romantic space-age name."

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