The New York Stock Exchange and the Pacific Stock Exchange moved one step closer to a merger yesterday, asking their members and others to comment on the proposed link.
The proposed merger is expected to be one of the main topics of discussion when members of the New York exchange gather for their monthly meeting tomorrow. NYSE spokesman Richard Torrenzano said yesterday the key benefits of a merger would be extended trading hours for stocks and and the upgrading of the PSE to a "high-quality auction market for NYSE-listed stocks on the West Coast."
He also said a merger would "continue the development of the West Coast as an international marketplace in the financial community."
Sources said they believed a merger initially would lead to increased trading for a few hours a day.
Ultimately, this and other links could lead to 24-hour trading for all stocks listed on the NYSE, the London Stock Exchange and the Tokyo Stock Exchange.
Torrenzano said discussions between the NYSE and the PSE are serious, but no commitments have been made.
He said the NYSE and the London Stock Exchange are holding preliminary discussions about a link.
Sources said the Securities and Exchange Commission has not been asked formally to review a merger between the NYSE and the PSE, although the agency is aware of the negotiations.
A merger would require the approval of the SEC and the membership of the two exchanges.
One benefit of a merger would be to reduce the problem faced by many investors when financial news is announced after NYSE trading has ended for the day.
A link would enable individual investors to trade stocks for a few more hours a day, giving them the same chance to react to financial news as institutions and those individuals who execute trades after NYSE hours through Jeffries & Co., a California brokerage firm that currently remains open after hours to serve its clients.
The proposed merger also would permit increased trading hours without forcing New York brokers and traders to work longer hours, since transactions late in the day on the East Coast could be handled by West Coast traders.
"We are talking seriously and moving ahead at a good pace, but we have not put a timetable on the discussions," Torrenzano said. "We have confidence in each other thus far."
Under the proposal, the PSE would become a wholly owned subsidiary of the NYSE. The PSE would be governed by a 15-member board of directors, nine of whom would be elected by the NYSE.
All PSE board members would require approval of the NYSE board, and one PSE board member would be appointed to the NYSE board.
The PSE, which trades 670 NYSE stocks, would trade all 1,550 NYSE stocks.
The NYSE would invest more than $10 million in the PSE during the first several years and as much as $20 million in the first decade after a merger. The PSE would become stronger in options trading.
Some members of the exchanges are concerned about losing control and diminishing the value of their equity stakes in the respective exchanges if a merger occurs.