Sometime early in the next decade, an era will end when the Pacific Exchange abandons its Pine Street home, leaving San Francisco without a exchange stock market for the first time in more than a century. The shutdown, quietly disclosed in connection with a regulatory filing several weeks ago, is inevitable economically and technologically. With most stock floor now handled by computer, dealers and brokers no longer need to do business face-to-face. A stock trading floor, with traders scurrying from post to post to place orders, is simply obsolete.
Though the move makes sense as a business decision, the brokers for whom the frenzy of the trading floor is in their blood say that life will never be the same. I like my little world. To be sure, the Pacific Exchange isn't going away as a stock-trading institution. When it shuts its trading floor, dealers and brokers will operate from separate offices rather than a central site.
What's more, buying and selling of stock options will continue for the foreseeable future at a less historic but far more active Pacific Exchange trading floor in the Mills Building on Montgomery Street.
As a preliminary step toward phasing out its stock trading floor, the exchange asked the U. Securities and Exchange Commission last month to let its specialists operate off the exchange floor. Specialists are the firms that promise to buy or sell the shares of specific companies, ensuring that a market in those stocks is always available.
If it gets a go-ahead, Pacific will move two of its 38 specialists off site as a test. Presuming that goes well, the exchange will close down its Pine Street site as well as a second trading floor in Los Angeles within two or three years, Pacific officials said.
Pacific's lease expires inoptions the exchange can break the contract earlier than that. The exchange's below-market rent is scheduled to rise inwhich gives it added incentive to move out. With San Francisco already reeling from the loss of its biggest banks and brokerages, many see the closure of the city's equity emporium as another psychological blow. The exchange's massive, granite edifice was built in to house U. Treasury offices in the city. The exchange acquired it just as the Great Depression set in and began operating there in With its broad steps, heroic "Progress of Man" sculptures and imposing columns, the building became a sort of ground zero for the Financial District, a symbol of the city's monetary might.
San Francisco's status as the seat of an important regional stock exchange gave the city cachet. Yet for all its physical and symbolic weight, Pacific's Options Street trading floor has become an expensive anachronism.
Only about 5 percent of the The rest are processed by computer. Pacific's trading floor is a cavernous hall covered by a vaulted roof and skylight, a room with one foot in the past and the other in cyberspace. Old-fashioned chalkboards for displaying prices, now unused, line the walls. Electronic ticker tapes have been slapped on top of the boards. Wooden counters arranged in a horseshoe fill the floor. Computer terminals crowd the countertops, from floor spaghetti strands of wiring spew in all directions.
The floors are covered with order slips, candy wrappers and discarded newspapers. Brokers in shirt-sleeves sit on stools at workstations with banks of phones and terminals in front of them, bantering with their neighbors. Most of the exchange's floor brokers say they accept the shutdown. Stock trading has been losing pacific for Pacific in recent years as bigger, more-powerful markets such as the New York Stock Exchange and Nasdaq Stock Market use their muscle to take a bigger share.
Meanwhile, all stock exchanges, including Pacific, are losing business to so-called electronic communication networks, proprietary systems such as Reuters Holdings Instinet that match buy and sell orders by computer, eliminating the need for an exchange as middleman.
Faced with daunting competitive threats, Pacific nearly abandoned its stock business. When it agreed to merge with the Chicago Board Options Exchange last year, it said stock would sell or spin off its stock exchange business.
CBOE pulled out of the merger two months ago, citing delays caused by a federal antitrust probe. That prompted Pacific to dust off a plan aimed at making the exchange competitive in stocks. At the core of Pacific's stock strategy is a cutting-edge, and much-hyped, electronic trading system called OptiMark.
Pacific is the first U. The combination of cost savings from shutting the trading floor and new business attracted by OptiMark should make Pacific's stock business profitable again, exchange officials said. The exchange building is floor unique space, real estate experts said, a wide open hall with a mixture of Classic and Art Deco design in the middle of downtown.
The building could get leased by a law firm, as was the old Federal Reserve on Sansome Street, realty specialists said. Brown said he favors some kind of public as well as private use of the building. That would represent a change from the current situation in which public access to the building is restricted.
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Image 1 of 4. Independent floor broker Frank Gallagher worked the phones at the exchange. Chronicle Photo pacific Robin Weiner.
Image 2 of exchange. The Pacific Stock Exchange at the corner of Pine and Sansome in San Francisco's financial district. Image 3 of stock. Jay Constable of Oakland has managed his Mustard's Last Stand next to the Pacific Exchange in San Francisco for 16 years.
Image 4 of 4. Lindsey Sherman of Walnut Creek sipped coffee on the steps of the Pacific Options on Pine Street, which was built in Chronicle Photo by Robin Weiner.
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