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What Is NYSE Amex Composite Index and How Does It Work?

UTC by Marco T. Lanz · 5 min read
What Is NYSE Amex Composite Index and How Does It Work?
Photo: Shutterstock

In the guide below, we will discuss NYSE Amex Composite Index – one of the most important stock indexes in the United States maintained by the New York Stock Exchange.

Indexes in stock exchanges are indicators of the performance of different companies’ stocks trading in a specific exchange. Examples include the Dow Jones Industrial Average Index (DJIA), NYSE Composite Index, the Nasdaq Composite Index, the NYSE Amex Composite Index, and more. All of them are maintained by certain stock exchanges and serve to help investors in making decisions.

In this guide, we will speak on the NYSE Amex Composite Index – one of the most important stock indexes in the United States.

The NYSE Amex Composite Index Defined

The NYSE Amex Composite Index (or XAX) is one of the most important stock indexes in the United States as it is maintained by the New York Stock Exchange (NYSE). Consequently, this index represents the performance evolution of the listed stocks in the NYSE American exchange.

In addition to including small-cap companies listed on the NYSE exchange, this index also incorporates real estate investment trusts (REITs), master limited partnerships (MLPs), and closed-end investment vehicles.

In simple terms, the NYSE Amex Composite Index can be described as a tool that encompasses various important criteria to provide accurate data on the performance of listed companies in the NYSE American stock exchange.

History of NYSE Amex Composite Index

To delve into the NYSE Amex Composite Index, it is essential to track the origin of the American Stock Exchange. It traces its roots back to 1908 when it was established in New York City as the New York Curb Market Agency.

After undergoing multiple name changes and acquisitions by different companies, it was renamed in 1953 as the American Stock Exchange (AMEX). Since then, it has become one of the major stock exchanges in the United States for international quotations.

In 2017, after being acquired by other companies, it was rebranded as NYSE American, replacing its floor-based designated market makers and brokers with an electronic system.

In April 2021 the exchange managed to attract major companies by market capitalization at that moment, including Imperial Oil Limited (TSE: IMO) and Cheniere Energy, Inc (NYSE American: LNG). As a result, the market capitalization of the exchange soared.

The exchange primarily serves as a market for emerging growth companies, offering a variety of trading advantages, including modern execution technology and advanced trading functionality, with highly competitive transaction costs ranging from zero cents to $0.0005.

NYSE Amex Composite: Selection Procedure

The NYSE Amex Composite Index primarily consists of nano, micro, and small-cap stocks. This means it includes smaller-than-average companies in terms of market value.

During speculative periods when investors are willing to take on more risks in search of higher profits, these types of indexes are often more attractive. Small-cap stocks come into play as they are considered riskier due to their greater growth potential.

The NYSE Amex Composite Index is managed by ICE Data Indices, an entity responsible for managing financial indexes. The index composition includes all common stocks, American Depositary Receipts (ADRs), Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs), and closed-end investment vehicles listed on the NYSE American exchange.

When a new company goes public through an initial public offering (IPO), meaning its shares start trading on the stock exchange, it can be added to the NYSE Amex Composite Index. However, it must meet certain requirements:

  • The company must have its shares listed on the NYSE American Exchange to be considered for inclusion in the index.
  • The company’s shares must be common shares or American Depositary Receipts (ADRs), which are US depositary receipts representing shares in a foreign company.
  • Additionally, real estate investment trusts (REITs), master limited partnerships (MLPs), and closed-end investment vehicles are also considered for inclusion.

There are also cases when a company is suspended from being a part of the index, the most common one is a decrease in shareholders’ equity. If a company’s shareholders’ equity falls below certain thresholds due to operating losses or net losses during a specific period, its exclusion or suspension from the index may be considered.

The thresholds are as follows:

  1. Shareholders’ equity below $2 million due to losses in two out of the last three years.
  2. Shareholders’ equity below $4 million due to losses in three out of the last four years.
  3. Shareholders’ equity below $6 million due to losses in the last five years.

If a company faces a significant loss that threatens its ability to continue its operations in the future, it may also be considered for exclusion from the index.

NYSE Amex Composite vs Other Indexes

The NYSE Amex Composite and other widely followed indexes in the financial market differ in several aspects.

For example, in terms of composition, the NYSE Amex Composite Index focuses on stocks of nano, micro, and small market capitalization, while the S&P 500 includes the 500 largest and most established companies in the United States. This means that the NYSE Amex Composite is composed of much smaller companies than the S&P 500, which includes companies with significant market capitalizations.

Regarding volatility, the S&P 500 offers greater stability by reflecting the capitalization of 500 established companies, while the NYSE Amex Composite, with its focus on smaller companies, may experience higher volatility.

The NYSE Amex Composite Index and the NASDAQ Composite also have significant differences. The NASDAQ Composite focuses on technology and growth companies, while the NYSE Amex Composite has a more diverse composition and can include a variety of sectors.

Therefore, all the indexes mentioned above have different compositions in terms of company size, diversification, and returns. It is important to consider all these characteristics when deciding on a single index for making investment decisions.

Conclusion

The NYSE Amex Composite Index comprises the shares listed on the NYSE Amex exchange – a market for smaller-cap shares, exchange-traded funds and derivatives. It has a lower trading volume than its competitors, but it includes smaller-than-average companies in terms of market value, giving them a lot of opportunities.

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FAQ

What is NYSE Amex Composite?

The NYSE Amex Composite is a stock index that represents the performance of stocks listed on the NYSE American exchange. It is one of the most important indexes in the United States and is maintained by the New York Stock Exchange (NYSE). Its symbol is XAX.

How does NYSE Amex Composite work?

The NYSE Amex Composite works as an indicator that reflects the overall performance of stocks listed on the NYSE American exchange. This index is periodically updated to reflect market changes.

What are the components of the NYSE Amex Composite?

The components of the NYSE Amex Composite Index are stocks of small-cap companies listed on the NYSE American exchange, as well as real estate investment trusts (REITs), master limited partnerships (MLPs), and closed-end investment vehicles.

What are the requirements a company must meet to be included in NYSE Amex Composite?

To be considered for inclusion in the NYSE Amex Composite, a company must meet the following requirements:

  • The company must have its shares listed on the NYSE American Exchange.
  • The shares of the company must be common shares or American Depositary Receipts (ADRs), which represent shares of a foreign company traded in the US.
  • Real estate investment trusts (REITs), master limited partnerships (MLPs), and closed-end investment vehicles are also considered for inclusion.

Can a company be delisted from NYSE Amex Composite?

Yes, a company can be delisted from the NYSE Amex Composite. If a company’s shareholders’ equity falls below certain thresholds due to operating losses or net losses over a specific period, it may be considered for exclusion or suspension from the index. Additionally, if a company faces a significant loss that threatens its ability to continue operations in the future, it may also be considered for exclusion.

How is NYSE Amex Composite different from other stock market indexes?

The NYSE Amex Composite and other widely followed indexes in the financial market differ in several aspects.

For example, in terms of composition, the NYSE Amex Composite Index focuses on stocks of nano, micro, and small market capitalization, while the S&P 500 includes the 500 largest and most established companies in the United States. This means that the NYSE Amex Composite is composed of much smaller companies than the S&P 500, which includes companies with significant market capitalizations.

Regarding volatility, the S&P 500 offers greater stability by reflecting the capitalization of 500 established companies, while the NYSE Amex Composite, with its focus on smaller companies, may experience higher volatility.

The NYSE Amex Composite Index and the NASDAQ Composite also have significant differences. The NASDAQ Composite focuses on technology and growth companies, while the NYSE Amex Composite has a more diverse composition and can include a variety of sectors.

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