Nasdaq and Amex

Introduction

I have been asked to write a report for a group of new stock brokers. The report is about the American Stock Exchange (AMEX) and the National Association of Securities Dealers Automated Quotations (NASDAQ). Some things I will discuss are the operations of each system and the similarities and/or differences of each system. Then I will explain how the WorldCom Inc. case had affected the company and the industry of telecommunication.

NASDAQ, AMEX, and WorldCom Inc.

NASDAQ is a system that electronically trades stock to the National Association of Securities Dealers (NASD). The system displays median quotes over 5,000 over-the-counter securities. In order for a company to list their securities they have to meet a set of financial requirements. AMEX is an advanced centralized specialist system that also electronically trades stocks. This system lists over 700 companies and is designed to help maintain liquidity. Here again there are requirements to list securities.

Today these systems make a great contribution to both the national and global economies. These systems are also order-driven auction markets. This is done by posting quotes in order to buy or sell stocks at better prices which are facilitated by specialists. Immediacy and liquidity is provided by limit orders on the AMEX system. On the NASDAQ system there are none. On the AMEX system the specialists are not allowed to trade ahead of limit orders at the same prices. These limit orders can not be updated instantaneously which causes them to be momentarily stale after a public announcement unlike the NASDAQ which creates trading losses.

The culture of WorldCom Inc. was individualistic and highly autocratic. There was also a secrecy culture in the company that was strong. Management was hiding financial data from the

board and the auditors which weakens internal controls. Their focus was on operational matters instead of financial manners and they did not have support from the senior managers, board of directors, or the audit team. This leaves me to believe that a greed culture was in top management levels that weren’t checked by the board of directors.

After all this the company was led into a downfall and the ones that were still with the company were dealing with a low governance, fraudulent accounting practices, share values being low, an image loss along with customer goodwill loss, and loss of faith from the investors. This all can be turned around. The first thing they