The board of the National Association of Securities Dealers, which runs the Nasdaq, approved a proposal Wednesday to acquire the American Stock Exchange, according to a source close to the merger talks.
Amex directors were reportedly holding a separate meeting on Wednesday and were also expected to approve the deal. However, even a double "yea" won't mean the merger is necessarily a done deal, since any decision by the boards will be subject to a vote by members of both stock markets.
Some members, noticeably Amex stock traders, are opposed to a merger. "Not everyone is going to keep their jobs," said one source close to the talks, who did not wish to be identified.
Another trader, who also asked not to be identified, said the first formulations of the merger proposal looked bad for Amex floor brokers, but the deal has reportedly changed since then.
Early interpretations of the merger proposal pointed to a near extinction of face-to-face "open outcry" trading, in favor of an all-electronic combined exchange. Amex floor brokers have apparently engaged management in talks this week in hopes of reaching a compromise that would give floor trades parity with electronic trades.
There has also been some opposition to the proposed merger on the Nasdaq side.
Nevertheless, if a deal is approved between the younger, high-tech Nasdaq and the venerable but slower-moving Amex - the nation's second and third-largest stock markets - it would create a more formidable competitor to the New York Stock Exchange.
The NYSE, the world's biggest stock market, listed 3,044 companies worth US$11.8 trillion at the end of 1997.
Founded 27 years ago, the Nasdaq has managed to shoot past the Amex in terms of new listings, with 5,466 companies worth $1.9 trillion listed at the end of 1997, including high-tech heavyweights Microsoft and Intel.
The market value of the 783 companies on Amex was $168 billion.
While Amex has lagged behind its larger rivals in equities, it has made a strong name for itself in the options arena, second only to the Chicago Board Options Exchange.
Analysts say a merger would give a strong lift to Amex's lagging equities business, allow the NASD access to the lucrative options business, and lend some credibility to the Nasdaq. The market has had an image problem since a 1996 investigation into whether brokers were bilking investors by keeping wide "spreads" between the prices at which they bought and sold stocks.
The American Stock Exchange is an "open outcry" auction market, where traders yell out offers around a stock-specific market-maker, or specialist, on a trading floor. Its much-storied beginnings stretch back nearly 150 years to when brokers started trading securities on a curbside in lower Manhattan.
In contrast, Nasdaq is a sprawling computer system that allows competing market-makers to display prices on computer screens with no need for a central trading floor.
