Pacific Exchange: The Rise, Peak and Disappearance of a West Coast Financial Titan

NEW YORK (TheStreet) -- San Francisco's financial district has long been a mainstay of West Coast business and investor relations, but not every resident remembers that not too long ago the city had a stock exchange of its own.

The Pacific Exchange was a regional stock exchange with equity trading floors in San Francisco and Los Angeles. By the 1980s, it was the country's third-largest options market. It boasted a 124-year run -- if its predecessors are included in the count -- during which it saw the West Coast through the Gold Rush, the stock market crash of the roaring 20's, the first uses of computers on the trading floor and the end of this regional exchange when it was absorbed into the New York Stock Exchange in 2006.

NYSE Euronext, which owned the New York Stock Exchange, was bought by Intercontinental Exchange (ICE) in 2013 for approximately $11 billion.

The exchange started in 1882 as the San Francisco Stock Exchange and began as a way to sell stock associated with massive amounts of silver found in Nevada, named the Comstock Lode, which sparked a silver rush.

Men who would become millionaires off the Comstock Lode discovery, including the four so-called "Bonanza Kings" particularly profited from the find and the exchange's involvement: John William Mackay, James Graham Fair, William S. O'Brien and James Claire Flood, for whom San Francisco's Flood Building on Market Street is named.

From 1860 to 1880, California's mining industry had produced $170 million in gold, making San Francisco home to more millionaires than New York or Boston, according to historical information from PBS.org. As the mining industry boomed, the exchange quickly became the "mecca for the mining industry of the Pacific Coast," the San Francisco Chamber of Commerce wrote in a 1915 book about the city.

While San Francisco was cultivating the world's leading mining exchange, Los Angeles was testing out its own stock exchange, but with a different rare find.

The Los Angeles Oil Exchange opened in 1889, led by oil tycoons such as Wallace Libby Hardison, a founder of Union Oil, which merged into Chevron (CVX).

The individual exchanges survived the 1929 crash that led to the Great Depression. A report from the San Francisco Call-Bulletin newspaper noted the San Francisco Stock Exchange sold 31 million shares worth $2 trillion in 1928 for the annual market volume, but volume plummeted to 19 million shares worth $889 million in 1929.

By 1957, the San Francisco Stock Exchange and the Los Angeles Oil Exchange merged, creating the Pacific Stock Exchange (PCX), which changed its name to Pacific Exchange in 1997. Among the founders were financial moguls like Elias Jackson Baldwin, who built the Baldwin Hotel in San Francisco, and George Hearst, a pioneer in the mining industry, a U.S. Senator and father to newspaper publisher William Randolph Hearst.

When computers started working their way into companies, the PCX was among the first exchanges to automate in 1969 by using computers on the floor to complete some trades through a system called Comex, unless the trades were stopped by a specialist, noted a 1990 Congressional analysis report of U.S. Securities Markets and Informational Technology called "Electronic Bulls and Bears."

In 1989, the Pacific Stock Exchange scrambled to recover when the Loma Prieta earthquake knocked out all power. Employees jumped on planes to Manhattan and helicopters to Philadelphia to trade from American, New York and Philadelphia trading floors, whose employees welcomed them with applause, former Pacific Exchange Vice President Dale Carlson wrote in a piece recalling that day for the San Francisco Business Times.

By 1999, there were 17.5 million shares traded daily, the San Francisco Chronicle reported. Nearly all of them were done digitally. While this didn't diminish the importance of the exchange, the Pacific Exchange's reach into digital started conversations with Archipelago Holdings, which owned ArcaEx, the largest electronic exchange, the Chicago Tribune reported. ArcaEx is now known as NYSEArca.

With the advent of digital trading, the PCX trading floor in Los Angeles closed in 2001, with San Francisco closing the year later. The exchange launched PCX Plus in 2003, an electronic options platform.

By 2005, Chicago-based Archipelago Holdings bought the exchange, which merged with the New York Stock Exchange in 2006.

While this ended Pacific Exchange in name, in practice its influence lives on through the NYSE and through the impact it had on the West Coast. Its physical presence may be gone from San Francisco -- its well-known trading floor location is now home to a gym for city goers -- but the exchange was just one of the early building blocks that solidified the city as a major financial metropolis.

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