stated holding periodÐfor example, unregistered stocks acquired as a result of aprivate placement.. Holdings of foreign stocks (= ): Holdings of foreign stocks incountries with different tax treatments or legal environments maybe particularly attractive or unattractive, especially if individualsare unable to replicate the same portfolio on their own.. Performance = : This is the most common argument. A fundwill command a discount or premium based on the perceived abilityof its management team to deliver outstanding results.. Turnover ( ): In general, transaction costs, in the form ofbrokerage fees or bad execution in the market, drive a fund's returndown.. Management fee ( ): This is equivalent in nature to the previousargument because management fees are charged directly againstthe fund's return.605960
Therefore, the JEQ is much more an exception than a general case.Burton G. Malkiel, ``The Valuation of Closed-End Investment Company Shares,''Journal of Finance, 32, June 1977, pp. 847±859. The use of plus or minus signs indicatesif the effect acts in the direction of a premium or discount.
CHAPTER 1 INTRODUCTION49
Figure 1-4 JEQ Premium(Source: Compiled by author from Bloomberg data.)
50
THEORY AND TOOLS
Figure 1-5 Closed-End Fund Average Premium(Source: Elroy Dimson and Carolina Minio-Kozerski, ``Closed-End Funds: A Survey,''Financial Markets, Institutions and Instruments, vol. 8, The NYU Salomon Center forResearch in Financial Institutions and Markets, 1999.)
To this list a last one has also been proposed in the particular caseof country funds:. Market sentiment61 (=
): Based on the observation that premiumsin foreign country funds tend to move together, this hypothesissuggests that U.S. investors in aggregate price the systematic riskattached to a country differently than they price the U.S. market
61
See, for example, James N. Bodurtha, Jr., Dong-Soon Kim, and Charles M. C. Lee,``Closed-End Country Funds and Market Sentiment,'' Review of Financial Studies, 8,autumn 1995, pp. 879±918, or Charles M. C. Lee, Andrei Schleifer, and Richard H.Thaler, ``Investment Sentiment and the Closed-End Fund Puzzle,'' Journal of Finance,46, March 1991, pp. 75±109.
CHAPTER 1 INTRODUCTION
51
risk. Discounts or premiums in closed-end funds are one manifestation of this risk perception.In that context, closed-end funds have been subject to intensiveacademic study.62 One particular chapter of this research is of interestto us: the perspective of an arbitrageur confronted to a seemingly inef®cient market, in other words a potentially very pro®tableopportunity.ArbitrageAs a regulated investment institution, a closed-end fund is required toissue a prospectus regularly, in which it is generally possible to ®nd adetailed list of the assets held and of the general allocation policy. Fromthere arbitrage is a step away: If the fund trades at a discount and if it ispossible to replicate its underlying portfolio at a reasonable cost, anarbitrageur would buy the fund, sell the equivalent portfolio and lockthe discount until the fund opens upon maturity.This simple form of arbitrage has many variants. For example,instead of trading the underlying assets, an arbitrageur may want tobuy funds at a discount and sell others at a premium. The rationale isthat the position would pro®t from a narrowing of the spread. Becausediscounts and premiums tend to vary over time in a relatively unpredictable fashion, this strategy may be pro®table, but the funds shouldnaturally be chosen carefully. In fact, the most ef®cient way to arbitrage a closed-end fund is also the most dif®cult to implement: It consists of purchasing shares just before the fund is about to open.63 Figure1-6 for example, shows that funds stated to open come back to their netasset value progressively.64
62
In particular, Elroy Dimson and Carolina Minio-Kozerski, ``Closed-End Funds: ASurvey,'' Financial Markets, Institutions and Instruments, vol. 8, The NYU SalomonCenter for Research in Financial Institutions and Markets, 1999, presents a verycomprehensive review of the literature and of the issues behind the closed-endfund puzzle.63Indeed, the best way is to force it to open. However, this requires a signi®cant ownership and carries a lot of uncertainties because numerous funds' charters includeprotective clauses against hostile takeovers.64Note the implications of Figure 1-6. The consistent discount on closed-end fundssuggests some inef®ciency in the market with regard to their pricing. However,when a fund is scheduled to open, it starts showing a premium compared to itspeers, suggesting the discount decreases or disappears and prices return to ef®ciency.This selective ef®ciency is an integral part of the closed-end fund puzzle.
52
THEORY AND TOOLS
Naturally there are numerous dif®culties in these simplisticapproaches.65 In a strategy based on the expectations that the fundwill open, any news in that direction would provoke the market toreact and probably the discount to decrease signi®cantly. Indeed, themore certain the opening, the smaller the discount.With respect to strategies based on portfolio replication, the ®rstand foremost problem is that the fund's holdings are not constant;therefore a replicating portfolio has to be adjusted regularly. Thisusually happens much longer after the fund itself has beenrebalanced because rebalancings are made public only infrequentlyÐtypically quarterly. These adjustments generate transactioncosts and slowly dissipate the initial discount.66 The second mostimportant problem is the maturity of the position. Because there isno certainty that the fund will open anytime soonÐexcept if thearbitrageur is a major shareholder and in a position to make itopenÐthe arbitrage has to be carried until the discount disappears.If the replicating portfolio is not perfect, and in practice it rarely is,correlation with the fund will most likely deteriorate over time.Combined to a discount that may worsen before it improves, thearbitrageur may face situations in which the mark-to-market valuation is simply terrible. At this point is it justi®ed to keep faith, orshould the position be cut? A third dif®culty occurs if the fund certi®cate cannot be borrowed; the reverse arbitrage in which the fund issold to cash, the premium is then impossible, and an arbitrageur hasto wait for a discount to even take a position. Even if the fund can beshort-sold, a squeeze is always apt to appear and force the arbitrageur out at a loss.67For all the reasons above arbitraging a closed-end fund is in general a dif®cult proposition. However, precisely because of these apparent and real intricacies, and also because there is usually a lot of valueto extractÐconsider the 20 to 30 percent premium of JEQ as an exampleÐit can be very pro®table if executed properly.
65
For a more comprehensive discussion about closed-end funds and quantitativeresults of arbitrage opportunities, see Carolina Minio-Paluello, The UK Closed-EndFund Discount, Ph.D. thesis, London Business School, London.66For a discussion about the costs attached to an arbitrage position, see Jeffrey Pontiff,``Costly Arbitrage: Evidence from Closed-End Funds,'' Quarterly Journal of Economics,111, 1996, pp. 1135±1151.67A squeeze typically happens at the worst moment, for example, after the fund hasappreciated sharply. The lender wants to take his or her pro®t right away and theshort seller is forced to buy back the shares when they are at an unusually high price.
CHAPTER 1 INTRODUCTION
53
Figure 1-6 Premium to Maturity(Source: Elroy Dimson and Carolina Minio-Kozerski, ``Closed-End Funds: A Survey,''Financial Markets, Institutions and Instruments, vol. 8, The NYU Salomon Center forResearch in Financial Institutions and Markets, 1999.)
Convertible Funds
Convertible funds exhibit features that are a blend of open- and closedend funds. Usually the fund is offered through an initial funding process during which institutional investors are main contributors. Thefund is then listed on an exchange, and redemption or issuance ofnew shares is allowed upon delivery of physical assets identical tothose already held by the fund.This type of fund has originally been used to track indices. In thiscase the conversion option is equivalent to receiving or deliveringshares of the members of the underlying index in proportion to theirweighting. One early example of such a fund is the S&P 500 Standardand Poor's Depository Receipt (SPDR) listed at the beginning of 1993on the American Exchange (AMEX), or the Nikkei 300 fund listed in1995 on the Tokyo Stock Exchange and managed by Nomura
54
THEORY AND TOOLS
Investment Trust and Management. These products are typically targeted at individual investors and allow them to actively trade the indexas a common share. The conversion clause speci®es a minimumamount to redeem or issue new shares (for example, 50,000 sharesfor the SPDRs) and the rules to compute the exact number of sharesin the delivery process.In the United States these funds enjoy considerable interest andtrading volume. In agreement with the old adage ``You don't changea winning team,'' more have been issued over the years, and it is nowpossible to trade country fundsÐknown as World Equity BenchmarkShares (WEBS)Ðor other index fundsÐsuch as Diamonds based on theDow Jones Industrial Average, NASDAQ 100 Tracking Stock or S&P400 SPDRs.68 By contrast, the Nikkei 300 Fund has not been a tradingsuccess once listed. Indeed, arbitrageurs massively converted the fundinto Nikkei 300 shares in the ®rst year, dramatically reducing its trading liquidity. Because of high costs to create new shares, the fundmanager was unable to maintain a decent liquidity, and market interestfor the fund melted away progressively.The arbitrage is based on the equivalence between the funds and itsunderlying assets. Because of the conversion clause, the fund is effectively a closed-end fund that can be opened at will. If its market price ishigher than its net asset value, an arbitrageur would buy the underlying assets and sell the fund. In that situation the arbitrageur canalways create new shares by delivering the assets, thereby closingthe short leg easily. A possibly important question is to determinewhat is the minimum time to reach the conversion threshold. Duringthe period when conversion is not possible because the minimum sizehas not been met, the arbitrageur is exposed, particularly if he or sheshort-sold the fund. If we take the example of S&P 500 SPDRs, thispotential concern is in fact negligible because SPDRs rank regularlyamong the 10 most actively traded issues on the AMEX with volumesof several million shares a day. By contrast, this was not the case withthe Nikkei 300 Fund.In arbitraging convertible funds, the two most critical issues are thefund's distribution policy and the conversion process. Typically, indextracking funds distribute the largest part of the dividends they receive,but they may be taxed on these. In addition, timing is importantbecause distributions may occur sporadicallyÐfor example, everyquarter for SPDRsÐwhereas the universe of underlying stocks, on
68
See the AMEX Web site for more details.
CHAPTER 1 INTRODUCTION
55
aggregate, pays dividends virtually every day. Conversion is generallynot free, and quantity-rounding problems may generate signi®cantfriction costs over several hundred different names.Therefore, as is true with most other arbitrages, convertible fundsare the source of pro®table opportunities when handled rigorously.Here more than in any other case, arbitrageurs play an active role inproviding trading liquidity.69 These funds are primarily traded by retailinvestors for relatively small sizes, and arbitrageurs are apt to bringconsiderable size to the market, at a ``fair price.''
Holding Corporations
It is a well-known fact that a lot of holding companies in the 1980swere destroying an immense amount of shareholders' value, andcorporate raiders had an easy game buying them and tearing themapart. The parts were often individually valued much higher than thewhole, creating huge opportunities for ®nancial engineers and skilledbuyout investors. Eventually, the wave of terror that spread throughcorporate America led to massive divestitures from large corporationsimproperly diversi®ed, and strategic focus became the credo of theday.70 Breakup opportunities progressively disappeared, and nowadays the overhanging shadow of that period, combined with anincredible liquidity accessible to private equity funds, act as a powerful reality check on corporate diversi®cation.Holding companies have not disappeared, however, and surprisingly some of the same pricing anomalies still exist today with respectto the capitalization of the whole compared to that of its parts.Examples are relatively abundant, notably in foreign markets, becausethese markets have not been through a massive wave of consolidationand buyouts like the United States over the past 10 to 20 years. Even in69
Obviously this is a mixed blessing. In the case of the Nikkei 300 Fund, arbitrageursactually drove liquidity away by converting their shares. A combination of high costsand poor market reception kept institutional investors from originating new shares,and arbitrageurs were unable to short-sell the fund in quantities large enough tocreate some new shares either. Eventually the fund died a slow death.Nevertheless, this is not a general case because SPDRs in the United States havebeen successful for quite a while without entering the same death spiral.70For a discussion on takeovers and their consequences, see, for example, MichaelJensen, ``Takeovers: Their Causes and Consequences,'' Journal of EconomicPerspectives, 2, 1988, pp. 21±48 or Gregg Jarrell, James Brickley, and Jeffry Netter,``The Market for Corporate Control: The Empirical Evidence Since 1980,'' Journal ofEconomic Perspectives, 2, 1988, pp. 49±68.
56
THEORY AND TOOLS
the United States, however, some arbitrage opportunities are worthexploring, and we illustrate this point with the case of LoewsCorporation (LTR).71Loews consists of ®ve subsidiaries, out of which three are listedand two are still private: CNA Financial Corporation (CNA, insurance), Diamond Offshore Drilling (DO, oil drilling contractor),Bulova Corporation (BULV, watches and timepieces), Loews Hotels(hotels), and Lorillard (tobacco products).As of April 2000, LTR has 99.389m shares outstanding, holds 70.1mshares of DO (51.73 percent of its total capitalization), and 159.457mshares of CNA (87 percent of its capitalization). Bulova is relativelysmall, around $100m in capitalization. It only makes the conclusiontruer but does not change anything numerically. With market pricesof respectively $515/16 (LTR), $359/16 (DO), and $305/8 (CNA) on April 10,LTR is worth $5.1b, whereas its holdings of DO and CNA amount to$2.49b and $4.88b, for a total of $7.37b. The difference is $2.27b, noteven accounting for Lorillard or Loews Hotels. As it happens, Lorillardis a very pro®table and cash-rich business, which only aggravates themispricing.72 All together, LTR should be at least $2.27b higher, whichtranslates into $22.90 on its share price. The discount is therefore 30.86percent compared to its minimum fair value based on CNA and DOholdings. The discount has not always been as large, and in fact in thepast Loews has also traded at a premium, as shown in Figure 1-7.73 Thereasons for the existence of such a consistent discount are unclear, andthe whole situation is not without similarities to the closed-end fundpuzzle.74 Some explanations propose the illiquid nature of LTR'sunderlying assets as a possible route, or the existence of huge liabilities
71
This particular opportunity was originally mentioned by two friends, Vincent Jacheetand Laurent Saltiel, and I very much appreciate their suggestion.72Recall, for example, the RJR Nabisco buyout by Kolhberg, Kravis, Rogers & Co.(KKR) in 1989. The tobacco industry has some very interesting features, notablythe relatively low-tech environment and highly ``loyal'' customers, which madeRJR essentially a cash cow. To some extent, the same thing is true of Lorillard,which manufactures and distributes well-known brands.73Figure 1-7 shows the discount as a positive number. On April 10, for example, thevalue of 30.9 percent indicates that LTR is too low by 30.9 percent compared to CNAand DO holdings. Note also that what appears to be a premium before may still be anactual discount in reality if LTR is still too low compared to the value of its entireholding portfolio.74In particular, when a holding corporation announces a spinoff or liquidation of someof its assets, its discount disappears very quickly, an effect that has been observed aswell on closed-end funds.
CHAPTER 1 INTRODUCTION
57
hanging over Lorillard due to its tobacco business. In any case, even ifthe magnitude of the discount remains a mystery, the arbitrage opportunity is probably real. The discount appears to be distributed around0, which indicates that it may be possible to trade it alternatively onboth sides and lock the difference. Indeed, it could be assimilated to anoscillator, except for its sharp increase during the last month of 1999. Inaddition, the more volatile it is, the better because an arbitrageur willhave more opportunities to trade around its local average value.Taking advantage of this opportunity requires a lot of patience, however, because typically there cannot be any certainty about an improvement in the near future. Even if a position turns pro®table after a while,the cost of carry may have been signi®cant, possibly lowering thereturn to unattractive levels.75Historical PerformanceFor obvious reasons, it is dif®cult to access data about speci®c strategies involving arbitrage. The closest we can get to this is to extractdata from hedge fund records because there is simply no way toaccess information about proprietary strategies. Table 1-10 presentsthe aggregate asset size of different classes of hedge funds, as ofNovember 1999.The strategies mentioned explicitly refer to arbitrage or relativevalue, even though it is dif®cult to know exactly what is behind thelabel. As we indicated earlier, convertible arbitrage is questionablefrom an arbitrage perspective if volatility is a large component of therisk of carry, and the same thing is true of option arbitrage.These funds have posted very decent performances over the yearsas shown in Figure 1-8 (value of $100 invested on the ®rst year, compounded at the annual rate of return of the fund category).Interestingly enough, market-neutral funds are traceable for 25 years,hold the largest amount of capital by far, and their uninterruptedexponential growth suggests that markets are not necessarily gettingmore ef®cient on aggregate.The chart in Figure 1-9 also gives some interesting insight as to therelative pro®tability of the different strategies. Except for option arbitrage which seems to stand out from the crowd, all others have similar75
For another example of a holding corporation trading at a discount, see also ``What IsCMGI Worth?'' The Industry Standard, August 16, 2000, p. 79. The article suggests anaggregate valued of $39 a share, for the underlying portfolio for a traded price of$33.19. For an example of a holding corporation that is also a closed-end fund, seealso the MeVC Fund (ticker: MVC) www.mevc.com.
58THEORY AND TOOLS
Figure 1-7 Loews Discount(Source: Compiled by author from Datastream data.)
CHAPTER 1 INTRODUCTION
59
TABLE 1-10StrategyConvertible arbitrageFixed-income arbitrageMarket neutralOptions arbitrageRisk arbitrageStatistical arbitrageOther relative valueTotala
Assets ($ millions)
CAGRa
$1,865$1,584$4,165$778$3,001$1,440$2,627$15,460
14.9% (9)15.5% (18)16.0% (25)28.4% (5)13.2% (9)19.0% (8)8.2% (5)
CAGR: Compounded annual growth rate. The number in parentheses is the number of years ofdata available.
(Source: HedgeFund.net. Reprinted with permission.)
and steady performances. Are these pro®ts a re¯ection of the level ofmarket inef®ciency in the United States? Probably to some extent if weassume that the level of risk associated with these strategies is relatively low, which is far from certain. No similar data are available fromother international markets, but it is reasonable to assume that thereare at least as many opportunities, leaving aside uncertainties aboutdifferent regulatory environments.In any case, $15 billion is certainly not suf®cient to arbitrage theU.S. market. These pro®ts, therefore, represent only a tiny fraction ofthe money extracted by all arbitrageurs together, implicit as well asexplicit.
60THEORY AND TOOLS
Figure 1-8 Hedge Fund Performance by Strategy(Source: HedgeFund.net. Reprinted with permission.)
CHAPTER 1 INTRODUCTION61
Figure 1-9 Hedge Fund Performance by Strategy(Source: HedgeFund.net. Reprinted with permission.)
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2S TOCKS
INTRODUCTIONBy way of introduction, Table 2-1, along with Figures 2-1 and 2-2,present the world equity capitalization and the details of the ®ve largest markets.Considering that the world stock market capitalization was $21,626trillion in 1997 and $25,683 trillion in 1998, these ®ve combined markets list more than 75 percent of the world equity wealth. This particular percentage has varied signi®cantly over the years and seems to besteadily going up at this time. Figure 2-2 gives an indication about thedirection of equity capital allocation throughout the world. After beingextremely attractive to foreign investors until 1993 and 1994, ``emerging markets''Ðin a broad sense, any market other than the ®ve largestÐhave progressively lost ground, presumably as a consequence ofthe Mexican crisis in 1994. From that time a multiplication of crises inAsia and South America has steadily pushed capital back to moremature markets.With respect to arbitrage, the overall share of these ®ve markets isundoubtedly much higher than 75 percent. Indeed, outside the marketsof continental Europe, North America, and Japan, it is fair to say thatarbitrage is hardly more than embryonic because of inadequate tradingstructures, lack of liquidity, or regulatory restrictions. Therefore, ouranalysis is indeed inclusive of all the signi®cant markets in the realm ofequity arbitrage. It also turns out that they present striking differencesin many respects, making their successive examination instructive aswell as entertaining. Table 2-2 provides a simpli®ed overview of themajor exchanges and some of the issues we will cover.63
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64
THEORY AND TOOLS
TABLE 2-1 World Equity MarketsExchange(DomesticShares Only)
Capitalization Capitalization19971998(US$ Trillions) (US$ Trillions)
New YorkbTokyoLondonFrankfurtParis
10,6172,1611,996825676
12,8002,4402,3731,094991
Total
16,275
19,698
Average DailyVolumeAverage Daily(1998, Million Nominal (1998,Shares)US$ billiona)679.0492.91,668.2166.836.5
26.89 (TSV)3.00 (TSV)4.17 (REV)5.57 (REV)2.30 (TSV)8.05 (REV)
Notes: TSV stands for trading system view: Exchanges count as turnover only those transactionsthat pass through their trading systems or that take place on the exchange's trading ¯oor. REV isregulated environment view: Exchanges include in their turnover ®gures all transactions subject tosupervision by the market authority (transactions by member ®rms, and sometimes non-members,with no distinction between on and off market, and transactions made into foreign markets reportedon the national market).aThe nominal data have been calculated using a monthly exchange rate. At year-end 1998, 1USD= 5.8262FRF, 1USD = 112.8JPY, 1USD = 1.6656DEM, 1USD = 0.6011GBP.bIncluding NYSE and Nasdaq.(Source: Compiled by author from International Federation of Stock Exchanges (FIBV) data,www.®bv.com. Data as of December 31, 1998.)
DEFINITIONSFor the purpose of our discussion, a stock is a certi®cate of ownershipissued by a company, entitling its holder to certain bene®ts (such asdividends, capital appreciation, or distribution of new shares), andrights (such as voting rights or preferred subscription rights for newissuance).The de®nition above is simpli®ed, but it captures the largest part ofthe information we need:. As a partial owner, the stockholder is not a creditor, as opposed to a
bondholder. As such, the failure of the issuing entity is the mostcritical risk.1. The bene®ts and rights can usually be expressed in terms ofmonetary ¯owsÐthat is, capital gains, regular dividend pay1
This risk is not the only one, however; settlement risk, for example, is important whenbuying and selling securities. We concentrate in general on market risks because thoseare the ones over which traders have some control by adjusting the size and composition of their position.
CHAPTER 2 STOCKS
65
Figure 2-1 World Equity Markets by Capitalization, 1998(Source: Compiled by author from FIBV data.)
ments, or distribution of free shares. The nonmonetary bene®ts orrightsÐfor example, voting rightsÐare usually not relevant toarbitrageurs.2. The rights attached to the stock can be extremely diverse. Those ofinterest to us are mainly affecting either the outstanding number ofsharesÐfor example, splits, buybacks, preferred subscriptions tonew issuesÐor the total capitalization of the companyÐas wouldbe true of a merger or recapitalization.The types of corporate equity and their characteristics vary considerably from one market to the other. European stocks commonlyoffer detachable rights that can be traded separately because preferred subscriptions to new issues are fairly common. Germanyand the United Kingdom have lots of preferred shares, manyincluded in major indices. In Japan preferred shares and rightsare extremely uncommon, limited to banks and other ®nancial2
There may be exceptionsÐfor example, if a risk arbitrageur holds a position largeenough to in¯uence the ®nal likelihood of a corporate decision or is in a position toforce a closed fund to open. In practice, this rarely happens.
66THEORY AND TOOLS
Figure 2-2 Share of World Capitalization: Five Largest Markets(Source: Compiled by author from FIBV data.)
CHAPTER 2 STOCKS
67
institutions.3 In the United States, splits, share buybacks, mergers,and spinoffs are more frequent than anywhere else, whereas theyare nonexistent in Japan and growing but still limited in Europe.4From an investor's perspective, it is certainly important to clarify acompany's capital structure, and therefore its debt and equity characteristics. From an equity arbitrageur's point of view, the importantconcern is continuity in the listed equity capitalization. For example,the issuance of a bondÐeven a convertible bondÐhas usually no effecton an arbitrage position and therefore can be regarded as irrelevant.5On the other hand, conversion of outstanding convertible bonds mayaffect the outstanding capitalization and therefore should be monitored. In practice, only massive conversions are considered (i.e.,redemption at expiry).In the analysis that follows, a stock will be characterized mostly byits price, dividend stream and capitalizationÐin the form of its outstanding number of shares.
SETTLEMENTGeneral Process
Without entering too far into painful details, it is necessary at this pointto consider the general settlement procedures for stocks:. The exchange receives and handles the ordersÐthat is, it matches
buyers and sellers, each of them being uniquely identi®ed.
3
In general, preferred shares carry a preferential dividend yield that is generallycumulative; no dividend on common shares is allowed until the preferred havebeen paid. They also have privileged claims on corporate assets compared to commonshares, but these claims are still subordinated to those of debt holders.4For a speci®c discussion of share buybacks in Europe compared to the United States,see for example, ``Charms of Buy-Backs Are Resisted,'' Financial Times, May 11, 2000.5An important distinction here is price vs. structural impact. The issuance of new preferred equity shares, for example, may be perceived negatively by market participants,driving the price of the common stock down, and the same thing may be true of abond issuance. However, this would be considered for all practical purposes an exogenous shock. The actual conversion of convertible securities, on the other hand, willgenerally not affect the price of the stock but rather, require an index arbitrageur, forexample, to adjust his or her holdings and buy or sell more of the stock, as a directresult of the change in the structure of the listed capitalization. Naturally this is entirelymisplaced for strategies based on convertible arbitrage.
TABLE 2-2 Market Information on FIBV Member Exchanges, 1999
ExchangeAmerican StockExchange
Types ofSecuritiesTradedStocksWarrantsEquity hybridsecuritiesPortfolio depositaryreceipts
Trading System/Derivatives Market
TradingHours
SupervisoryBody
Floor trading, PER (for equities) andAMOS (for options) order routing andreporting systems.Auction market with specialists.Electronic limit order books forequities and options.
9.30±16.00
Securities andExchangeCommission (SEC)
8.30±17.00
9.30±16.009.30±16.00
SharesBondsWarrants
Floor trading (BOSS-CUBE)Xetra (screen-based)
London
FTSE 100
SETS
8.30±16.30
Other UK equities
SEAQSEATS Plus (inc AIM)SEAQ International
