Exchange Seat Proposal

The Pacific Exchange’s chief executive is lobbying to create two classes of seats--one to trade options, one for stocks--because the options business has become much more profitable.

Two seats on the Pacific Exchange sold last week for a record $500,000 each, up from $40,100 just a decade ago. Owning a seat lets traders do business on stock trading floors in Los Angeles and San Francisco and on an options floor in San Francisco.

The price of seats soared as options trading volume more than tripled over the last five years. Equity volume rose just 43% during that time, yet stock traders must pay the same as options traders to buy or lease their seats.

“The people on our equity floor really are being penalized,” said Robert Greber, chairman and chief executive of the exchange. “I don’t see very many people buying seats to open operations on our equity floors.”

Of the 552 seats, more than 400 are held by options traders. Traders profit from commissions on stock and option trades, so rising volume makes seats more valuable. An equity seat probably would be worth $40,000 or $50,000, Greber said.

Approval by two-thirds of the seat owners is needed to alter the exchange’s constitution and allow two classes of seats, Greber said.

More than half the seats are owned by investors who have no plans to trade, he said. They lease them to others, generally at a percentage rate based on recent seat prices.

In the last two months, Greber has met with non-trading seat owners in San Francisco, Los Angeles and Chicago to make the case for two classes of seats.

The exchange dropped “Stock” from its name about a year ago because options are the fastest-growing part of its business.