S.F.’s Pacific Exchange Hit by Power Outage

The Pacific Exchange in San Francisco was forced to shut down stock and options trading Tuesday after a widespread power outage at 8:15 a.m. knocked out electricity, and backup generators were insufficient to run computer systems.

The shutdown came in the middle of business, eliminating trading in hundreds of popular put and call options contracts on major stocks, including such tech names as Microsoft and Compaq Computer.

It was the exchange’s first major trading disruption since the Loma Prieta earthquake in 1989.

The exchange’s Los Angeles trading floor, which trades individual stocks, remained open but closed a half-hour early. Traders rerouted some customer trades to other exchanges.

Some traders on both floors were concerned that the shutdown might mean a loss of data when the system is revived today. At the very least, some trades in process at the moment of the outage were interrupted.

“We had generators to shut down the computers and save the data, so we’re hopeful,” said Dale Carlson, spokesman for the Pacific, the country’s third-largest options exchange. “The data all seem to be intact.”

The Pacific is located in two older buildings in San Francisco, both badly in need of modernization, the exchange admits.

“We don’t have sufficient [emergency] generating capacity here to run the trading floors and the data systems,” Carlson said. “That’s what we are looking for in retrofitting a new facility.”

Equity trading is a small slice of business at the 116-year-old Pacific Exchange. Options trading is the principal business: The exchange lists options on about 875 stocks and holds exclusive options trading rights on about 650, including those on Microsoft and Compaq.

Put and call options, which have soared in popularity in recent years, allow investors to make bets on stock price movements--or hedge against stock price movements--with relatively little money down.

The contracts have become key portfolio elements for many investors.

“We’ve got to get this back up; we’ve got to get Microsoft going again,” said David Hultman, a trader in San Francisco. “We’re in uncharted waters” because the interruption occurred in the middle of trading.

Although power returned at 1:20 p.m., both the San Francisco equity and options trading floors remained closed.

During the power outage, computer screens went blank and traders, many using flashlights, gathered on the options trading floor under low-wattage light bulbs. They could call customers, but didn’t know when calls were coming in, because phones weren’t ringing or lighting up, traders said.

The equity trading floor in San Francisco was brighter, because a large skylight allows in natural light, sources said.

“With all the threat of earthquakes here, you’d think a power outage would be one thing we could handle,” said Hultman, who has been working at the Pacific in San Francisco since 1985.

BankAmerica Corp.’s trading floors in San Francisco remained active, running on emergency power. Citigroup Inc. and Charles Schwab offices reported brief outages but regained power after their generators kicked in.

Lights also went off at headquarters for securities firms NationsBanc Montgomery Securities, Robertson Stephens Investment Management, Hambrecht & Quist and Transamerica.

The power outage comes amid a pending merger for the Pacific. In November, the boards of the Pacific and the Chicago Board Options Exchange agreed to merge into one market, which would trade the bulk of the nation’s stock options.

That agreement is expected to be ratified early next year by members of both exchanges.