Amex president pulling no punches in bid to win banks from Nasdaq.

For the hundreds of banks and thrifts listed on Nasdaq, Richard Syron suggests a little math homework.

Mr. Syron, chairman of the American Stock Exchange, said that banks, especially smaller ones, suffer from a wider gap between the daily bid and ask prices in the over-the-counter market.

Indeed, Amex officials claim their auction market offers an average dollar spread for banks and thrifts of 28 cents versus 86 cents on Nasdaq. For small-cap banks the "inside" spread, as the gap is known, rises to $1.49 on Nasdaq.

The American Exchange is arguing that the wide inside spread discourages trading and is costly to retail investors.

Mr. Syron, until recently the president of the Federal Reserve Bank of Boston, offers a blunt assessment befitting a former regulator. "If a banker had a loan with the performance of their stock [on Nasdaq], they'd have to classify it," he said.

Taking Aim on Banks

So far, that message hasn't made it to most bankers. Nasdaq is the market of choice for 663 banks and thrifts. At that level, the over-the-counter market has 86% of all exchange-listed stocks and three out of five publicly held banks.

By comparison, the American Stock Exchange is home to 36 banks and thrifts, a scant 3% of a universe of about 1,000 publicly held financial institutions. Even before Mr. Syron arrived last month, the exchange had begun to target banks. as a sector that might be attracted to the historically tighter spreads.

"We feel we have advantages over the OTC market in general, but it's especially so for banks," Mr. Syron said. "They are treated incredibly poorly compared to other

Mr. Syron said that too many companies, including banks, have been won over by Nasdaq's self-promotion as the stock market for the next hundred years. "So far," he says, "this is a victory of slick advertising over mathematics."

In the gentlemanly world of finance, those are fighting words.

"If they think a $750 billion stock market can be created on advertising alone, they're really out of touch with why companies try to raise capital in the public markets," said Nasdaq spokesman Rich Myers. "We don't even consider Amex competition. Given their tiny market share, I can understand why they would target that sector."

Nasdaq declined to challenge Amex's spread comparisons or offer comparisons of its own. Indeed, Nasdaq officials do not dispute the wider spreads, but insist they are the product of a market making system that provides broader liquidity than the Amex's specialist system.

"Spreads are only part of the picture," said Mr. Myers. "You have to look at performance, liquidity, and other factors." - For instance, he said, Nasdaq-listed companies have an average of 11 market makers ready to use their capital to support a stock in a more competitive market. Mr. Syron called the market maker argument a "fallacy" that he says is perpetuated by investment bankers who have selfish reasons to advise banks and thrifts to list on Nasdaq.

Traders at two brokerages insisted that Nasdaq provides better liquidity to bank stocks, many of which are thinly traded and little known.

"Nasdaq ensures that someone will be there to buy the stock," said one trader. "The spread doesn't really matter for the average investor because they are buying and holding."

Says Brokers Got the Profits But David Buell, chairman of Los Angeles-based Metrobank, said that brokerages profited from the Nasdaq system at the expense of shareholders. Before his company moved to Amex in 1988, the $10-$12 share price had an average inside spread of $1.50.

"We would have a shareholder who would sell 10,000 shares and a then see the broker turn around and sell them for 75 cents a share more," he said. Since moving, the stock has had an average bid-ask spread of 12.5 cents.

"It was night and day," Mr. Buell said. "As bad as it was with Nasdaq, it has been that good with Amex."

Officials at CFX Corp., a $669 million-asset thrift, said they switched from Nasdaq in 1990 during troubled times in their home state of New Hampshire.

"Because of the New England banking problems, the market makers were backing away," said-Peter Baxter, chief executive officer. "Their interest in those stocks dwindled."

He said that after the company listed on the American Stock Exchange, the daily inside spread, which had been half a point, dropped to a quarter. Mr. Baxter said that up to a dozen market makers followed his stock on Nasdaq, but after the switch "the world didn't come to an end."

One benefit of the Amex is better market intelligence. Mr. Baxter said that if he wants to know who is buying or selling his thrift's stock, he can telephone the exchange floor where his company's specialist, Spear, Leeds & Kellogg, can tell him who is buying and selling CFX shares.

Not everyone agrees. At Westamerica Bancorp., a San Rafael, Calif.-based super community bank, officials switched back to Nasdaq last month - five years after leaving for Amex.

"We did it because we thought we would get a lot more sponsorship out of being on Nasdaq," said Joe Bowler, senior vice president and treasurer at Westamerica. He said that 10 firms now make a market for his stock, and the number may soon increase to as much as 15.

As for the inside spread, he said the gap moved from a quarter point to a half point on Nasdaq. But, Mr. Bowler adds: "If we get enough market makers, we don't think there will be much difference between the two."

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