CALIFORNIA : Pacific Exchange Directors Support For-Profit Structure

Pacific Exchange directors voted Wednesday to convert its stock-trading floors into a for-profit corporate subsidiary, in an attempt to raise revenue and increase the number of people trading there.

The move will make the exchange the first U.S. securities market to move formally toward a for-profit, corporate structure.

With its volume shrinking, the Pacific Exchange’s stock floors lose $500,000 a month, said Dale Carlson, the exchange’s vice president for corporate affairs. The restructuring is intended to lower costs and make the exchange’s San Francisco and Los Angeles floors more attractive places to trade.

Traders spend about $8,000 a month to lease seats from members and one must own or lease a seat to trade on the exchange. The Pacific, a not-for-profit membership organization, wants to introduce permits that traders would lease directly from the exchange for about $2,000 a month. Traders on the competing Boston Stock Exchange, for example, pay nothing to lease seats there.

The plan requires approval by the exchange’s seat holders and by the Securities and Exchange Commission, expected later this year. Traders would still need to lease or own a seat.

“I’m in favor of spinning off the floor, but I’m not in favor of the equity trading permits,” Paul Liang, who owns 49 of the exchange’s 552 seats and leases them to traders, told Bloomberg News.

Carlson said the exchange wants to complete its restructuring by the end of the year. If successful, the exchange may consider raising money through a public offering or a private placement, he added.

Both the New York Stock Exchange and Nasdaq Stock Market are considering public offerings.