Merger Talks Spur Sales of Pacific Seats

Confirmation that the Pacific Stock Exchange and the New York Stock Exchange have been holding merger talks stirred a flurry of seat trading Monday on the Pacific and boosted the price of a seat there by as much as 60% to $40,000.

In all, six seats changed hands Monday, about the number that would normally be traded in a month, a Pacific official said.

The Pacific briefly suspended trading in its seats until news about the talks had been circulated to all of its members early Monday morning.

When seat trading resumed at 9:15 a.m., according to Jim S. Gallagher, the exchange’s president, a seat changed hands for $30,000, up from $25,000, the price at which a seat was last traded, on Dec. 31.

Later in the day, four more seats were sold at $40,000 each. Then the price fell back to $30,100 when a sixth seat changed hands. By day’s end, the bid price for a seat was $30,000 and the asked price $42,000.

“People would assume that there may be some potential benefit to owning a seat over here if there is a merger,” said Gallagher, who joined the Pacific from the Big Board four years ago. “That is why the price has risen sharply.”

Both exchanges confirmed Monday that they have been holding merger talks for several months. They said that they had informed the Securities and Exchange Commission that such talks were under way but added that they had not given the commission any formal proposal.

The SEC said it had been informed about the talks but declined comment on them.

“We expect those talks to continue,” said Gallagher. “We have not agreed upon a proposal.”

A spokesman for the Big Board, Richard Torenzano, said that the two exchanges had been holding discussions “about a possible joint venture which could include a merger . . . but no agreement has been reached.”

The talks are part of an expected evolution toward a worldwide, 24-hour securities trading market. Recently, the New York Stock Exchange said it was conducting talks with the London Stock Exchange about possible joint ventures, which may include securities trading and the exchange of data.

But Big Board officials said Monday that there was no connection between the talks with the London exchange and those with the Pacific.

The New York Stock Exchange is also asking its members and large institutions whether or not they would like to see the current six-hour trading day expanded.

It is clear that in any merger with the Pacific, the New York Stock Exchange would overshadow the Pacific. Founded 192 years ago, the NYSE’s average daily volume has tripled in the last five years to 91.2 million shares traded. About 1,600 brokers, specialists and support staff work on its floor.

The Big Board has 1,366 members. A seat on the exchange sold as recently as last Friday for $325,000. Twenty-five seats were sold last year at prices ranging between $400,000 and $290,000.

The Pacific has only 516 members, about 700 employees and an average daily volume last year of 4.5 million shares and 4,500 options contracts.

It is the second largest of the regional exchanges. While the NYSE trades 84% of the shares listed on that exchange, the Midwest, located in Chicago, accounts for 6.7% of trades of NYSE-listed companies. The Pacific is next with 3.23%.

The Pacific has two stock trading floors, in Los Angeles and San Francisco, as well as an options trading floor in San Francisco. It was created in 1957 from a merger of the Los Angeles and San Francisco exchanges.