Merger talks between the New York Stock Exchange and the Pacific Stock Exchange, under way since late last year, have broken down, a member of the Big Board committee appointed to study such a marriage said in a telephone interview Thursday.
"The two exchanges could not find a way to put things together that made economic sense," said the source, who spoke on condition that he not be identified.
He said the committee, appointed by NYSE Chairman John J. Phelan Jr., visited California during the last two months and then took a vote that was nearly three to one against the merger.
Officially, the NYSE says a consolidation is still under consideration. Richard Torrenzano, a Big Board spokesman, said in a statement that "the NYSE is evaluating results of its discussions with the Pacific Stock Exchange concerning a possible merger. The evaluation is expected to be completed in the autumn."
In a telephone interview, Torrenzano declined to confirm that the merger is unlikely to happen.
Charles Rickershauser, chairman of the Pacific exchange, declined to speculate on the accuracy of the reports.
"We are the small exchange, and we are not going to make a deal with them unless they want to," he said of the NYSE. "They are conducting an evaluation. I am waiting for it to finish. We regard the ball as being in their court. . . . Till we hear from them, there is nothing we can do."
The threat of loss of business played a crucial part in the negative response of the NYSE committee, which numbered more than 20, a "broad cross section of members" including specialists, brokers, floor traders and others, according to the committee source.
"We are competitors," he said. "I suppose they thought they'd lose some market share and that might lower their income."
Any decline in income could also result in an eventual drop in the value of a seat on either exchange. The last sale of a NYSE seat on June 12 was for $400,000, up $10,000 from the previous sale two days earlier.
On June 21, a Pacific seat was sold for $31,000; the current bid is $30,000 and the asked price is $34,000. When news of the merger talks was first announced in January, the price of a seat on the Pacific exchange jumped by as much as 60% to $40,000.
While the source was speaking about the concerns expressed by members of the NYSE committee, floor members of the Pacific exchange, which operates trading floors in both Los Angeles and San Francisco, have also expressed reservations.
Last February, the NYSE proposed that, if the two markets merged, it would infuse at least $10 million into its smaller West Coast counterpart over four years. But in return, the bigger exchange would dominate the Pacific's board of directors under the proposal.
Meanwhile, the NYSE is known to be concerned about the growing volume of trading in NYSE-listed stocks after its close. A merger with the Pacific exchange might have led to trading in such stocks continuing for as much as three hours after the Big Board closes.
The NYSE announced Wednesday that it will start trading hours 30 minutes earlier in September.