Options War Goes Coastal With Softee Skirmish

The Pacific and Amex get into the listings fray.
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The X-wing fighters of the tiny

Pacific Stock Exchange

Friday took on two Death Stars, striking back at the No 1.

Chicago Board Options Exchange

and No. 2

American Stock Exchange

, as traders on the San Francisco floor scrambled to file applications to trade 24 new options listings next week.

With its listings assaulted by competitors, the Pacific hopes to begin trading 17 new options and seven multiply listed options Wednesday, Sept. 1, such as

Amgen

(AMGN) - Get Report

,

AT&T

(T) - Get Report

,

Home Depot

(HD) - Get Report

and the granddaddy of all options,

Intel

(INTC) - Get Report

.

It didn't take long for the AMEX to respond. By late Friday afternoon, the exchange was already in the mix, counterlisting 25 already multiply listed options, such as

Microsoft

(MSFT) - Get Report

and

Compaq

(CPQ)

, the Pacific's two premier listings.

Until a Friday afternoon powwow, the Pacific had been unusually quiet in the multiple-listings war. The battle has raged almost exclusively between the No.1-ranked

Chicago Board Options Exchange

and the No. 4

Philadelphia Stock Exchange

. Then the Chicago exchange escalated the fighting

Friday morning by filing to list Microsoft.

Regulators have been pushing for multiple listing of all options because it likely would create tighter spreads for investors. The resulting process, driven also by the emergence of electronic

International Securities Exchange

, has been less than orderly for the past week.

Meantime, the Pacific's listing of Intel may pit its new enemies against each other. "It could be that the Pacific will force the big exchanges, the AMEX and the CBOE, to list each other's most popular options. And then, all bets are off," says one veteran Chicago trader.

This heated competition for listings has erupted from a gentleman's system of "grandfathered" options that only traded on one of the nation's four options exchanges. Now, however, it's kill or be killed.

"If I were the Pacific, I'd rather take on the CBOE and fight just on one front," the Chicago trader says. "Taking on the AMEX is tough. They're in New York, they're close to the options order flow, they have good technology. And the

Nasdaq

has deep pockets."

And in Chicago, the CBOE seems girded for more face-offs. Mark Esposito, a

Merck

(MRK) - Get Report

market maker on the CBOE, says "in every war you have skirmishes first before the big battle. But it's definitely inevitable. In today's environment it's beneficial for the customer to give them the most competitive market."

In this new environment, he says, options trading "isn't people playing little hands of poker with their friends anymore. It's time for the All-National Tournament."

Meanwhile, the CBOE can fight on two fronts, the Pacific and the Philadelphia, because the two smaller exchanges are "technologically inferior," another CBOE trader says.

PHLX Chairman Meyer "Sandy" Frucher disagrees with that assessment. "We've had no problems and no technology breakdowns at all this week," he says, pointing to the exchange's new system. "We're the little engine that could. We can only gain in this battle."