ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, January 16, 1996 TAG: 9601160031
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: BOSTON
SOURCE: JAN CIENSK ASSOCIATED PRESS
LAST YEAR, regional exchanges accounted for almost 20 percent of combined NYSE and regional business.
The New York Stock Exchange has long held its reign as the granddaddy of the big markets.
But some regional exchanges that always trailed in the shadows have taken a chunk of the Big Board's business. That's stirring some infighting as both sides try to position themselves.
Last year, the regional exchanges - in Boston, Philadelphia, Chicago, Cincinnati and Los Angeles and San Francisco, which share the Pacific Exchange - accounted for almost 20 percent of consolidated tape trades - the combined business of NYSE and all the regional exchanges.
That's a far cry from the early 1970s, when the regional exchanges accounted for only about a 5 percent share.
Much of the increase stems from a bill passed by Congress in 1975 that forced dealers to trade stocks at the best price, no matter which exchange offered that price.
``Any educated businessman knows that competition is important,'' said Andrew Kolinsky, senior vice president of marketing at the Chicago Stock Exchange. ``If there was only the NYSE, I don't think businessmen would be very happy. Giving us business is important to keep New York competitive. We can't be as good; we have to do better.''
After Congress' decision, the smaller markets began nibbling at New York's heels, whittling the giant's share of the market to a low of about 65 percent of consolidated trades in 1992.
But recently the NYSE, spearheaded by new chairman Richard Grasso, has been fighting back, looking to recapture some of its lost share.
``We do treat [the regional markets] as serious competition,'' said Edward Kwalwasser, the NYSE's group executive vice president responsible for regulation. ``We believe customers should go to the best market. We believe that we are the best in most areas.''
In October, the exchange set up a pilot project with Merrill Lynch & Co. Inc., the nation's largest investment firm, called NYSE Prime.
The program informs investors of how much money they save on stock transactions executed on the NYSE. The savings will come as a result of ``price improvements,'' which are the execution of market orders at a price better than the best current bid or offer for that stock.
Merrill, like many other firms, trades both on NYSE and on the regional exchanges, but it decided to reduce its business in the Boston and Pacific exchanges because of the Prime program.
The Prime program has since been opened to all member firms of the NYSE, and many have indicated interest in it, said Andrew Yemma, vice president of media relations at the NYSE.
To counter the move by the NYSE, the regionals are banding together to create similar programs that would entice traders to use their exchanges.
``We are the cheapest place to do business in,'' said William I. Lee III, senior vice president of customer service and communications at the Boston Exchange.
Companies that want to be listed exclusively on a regional exchange pay thousands less in listing fees and are subject to much less stringent requirements than in New York.
But the strong challenge from New York is making some of the regionals feel vulnerable. New York's aggressive thrust into their markets will force the regionals to be leaner and faster.
There is a marked trend to fewer stock exchanges. A hundred years ago, many large cities had their own exchanges, which provided capital for railways and regional businesses.
As America's economy became more unified, many of the smaller markets died off or were forced to merge with larger ones. Today's regional markets, whose number hasn't changed in 15 years, are the survivors of that winnowing process.
``I don't think there will be as many exchanges as there are now, but there will still be some,'' said Dale Carlson, vice president of corporate affairs at the Pacific Stock Exchange. ``It's just been a steady process - disappear or merge - and we may see more mergers or some exchanges may fold.''
LENGTH: Medium: 82 linesby CNB