L.A. becoming foreign exchange hub.

San Francisco may have the state's major bank headquarters, but L.A. has become the West Coast hub of foreign exchange.

Foreign exchange trade on the West Coast has flowed steadily southward in recent years, as major trading banks focus their operations on where the import-export action is - Los Angeles.

On an average trading day, some $3.6 billion in currency exchanges take place in L.A., involving major currencies such as Japanese yen, English pounds and German marks - as well as emerging currencies such as Thai baht, Singapore dollars and Malaysian ringgit.

Foreign currency traders are being attracted to Southern California because of the large number of companies here and the local importance of international trade, said Kay Hamahashe, executive vice president of the treasuries division for Union Bank of California.

Union, along with Bank of America and Sanwa Bank California, operate downtown L.A.'s three major foreign exchange floors, where business has been growing at an annual rate of 8 percent to 15 percent for the last few years.

"The majority of foreign banks, their branches and subsidiaries are in Los Angeles. Also the population of companies is greater in Southern California than Northern California," Hamahashe said.

The growth of foreign exchange business in L.A. reflects the region's growing prominence as an international hub for trade and business with the Pacific Rim. Companies that buy or sell their goods and services abroad must often pay for or receive payment for those goods or services in foreign currencies, which they then typically want to convert back into U.S. dollars.

Foreign exchange "marketers" take orders from those companies wishing to buy or sell their foreign currencies, and then those orders are passed on to "traders" who conduct the actual transactions.

Banks that engage in foreign currency trading earn their money either through the spread - by charging customers more for currency than their own purchase price - or by taking long or short positions for the bank's own account when they think a particular currency will move up or down relative to the U.S. dollar.

On an average day, BofA's L.A. trading room would do reasonably well to make $3 million in profit off its average $3.5 billion in trading volume, though the figure could be much higher or lower depending on market movements, traders said.

L.A.'s prominence in foreign exchange is exemplified by Union Bank of California, which was formed by the 1996 merger between Bank of California and Union Bank. Following the merger, the new bank's parent company, Bank of Tokyo-Mitsubishi, shuttered the former Bank of California foreign exchange room in San Francisco and merged its operations with Union Bank's trading room in L.A. last April.

BofA has also moved several of its foreign traders from San Francisco to L.A. in recent months, though the bank also continues to maintain a major trading floor in Northern California.

In fact, BofA's trading floor is easily L.A.'s - and probably the West Coast's - largest trading floor, with an average $3.5 billion in foreign exchange changing hands here each day. By comparison, Union Bank of California averages about $90 million per day, and Sanwa averages between $10 million and $50 million.

The action at BofA begins about 5 a.m., when most of the 50-odd staff come to work in the computer-cluttered room on the 19th floor of 300 S. Grand Ave. Operations continue there on a 24-hour-basis, though its off-hours staff is much smaller.

The room was already bustling with activity during a recent 8 a.m. visit. Clocks reflecting nine different time zones line one wall, along with two TV monitors flashing news from the MSNBC and CNN business networks.

The headline, "Germany's Kohl, Dutch Prime Minister Kok pledge successful EU summit" scrolls across an electronic bulletin board in big bold letters - an unsubtle reassurance to traders that European Union currencies are a safe bet for the moment.

The flashing words and images are punctuated by the bark of traders' voices, as marketers receive their orders and stand up to attract the attention of traders to fill those orders.

"Fifty dollars while you can!" shouts out one trader.

"That was the wrong move, what you said!" rebuts another.

But the action on this seemingly busy day is relatively quiet compared with some of the most hectic days, explains Chris Mandel, senior vice president and BofA's deputy head of foreign exchange.

"There always seems to be an event a year," she says. "In 1992 and 1993, several currencies left the European Monetary System. During that time I frequently slept here on the couch."

More recently, the action in L.A. is coming from the Thai baht, adds Mandel. News of economic woes in Thailand have resulted in a selling spree of the Thai currency, even as the Thai government has tried to stem the selling by raising interest rates as high as 1,000 percent.

In fact, L.A. has become BofA's center of trading for nearly all Asian currencies, drawing on the expertise of local traders as well as its geographic proximity to Asia, Mandel said. Likewise, Union and Sanwa both do a healthy trade in Asian currencies - especially the yen of Japan, where their parent corporations are the country's No. 1 and No. 2 banks, respectively.

The next big events for all three L.A. trading floors will likely come in the months ahead, following Hong Kong's return to Chinese sovereignty this week, Mandel predicted.