Market Makers Sign On to Pacific Exchange

Credit Suisse First Boston and Morgan Stanley are among five firms that agreed to act as market makers for the Pacific Exchange when the options market starts an electronic trading system in October.

Knight Execution Partners, Timber Hill and Wolverine also will make markets on the system, the San Francisco-based exchange said. Options are the right to buy or sell an asset at a set price by a certain date. Market makers stand ready to buy when investors want to sell, and vice versa, smoothing trading.

The Pacific Exchange aims to recoup market share from the all-electronic International Securities Exchange, which became the second-biggest U.S. options market this year.

The Pacific Exchange, the smallest U.S. options market, handled 7.31 million contracts in June. The Chicago Board Options Exchange, the biggest, handled 25.3 million contracts. The ISE handled 22.3 million contracts. The Pacific Exchange closed its Los Angeles trading floor in May 2001 as trading activity declined.