Pace of the trading picks up at the Pacific Stock Exchange in anticipation of recovery.

Anticipation of an economic recovery coupled with record-low interest rates and extended operating hours has set a faster pace for trading at the Pacific Stock Exchange in downtown Los Angeles.

The increased activity is in large part a reflection of what the Federal Reserve Board has been doing with interest rates, said Dale Carlson, vice president of corporate affairs for the Pacific Stock Exchange.

While the Fed has pushed down interest rates, investors view the stock market as a calculated risk, with potentially favorable yields of 8.5 percent to 9 percent and rapid returns. It offers an attractive alternative to standard long-term investments, such as interest-bearing money market accounts and real estate, according to Bruce Pally, vice president of the Los Angeles-based Kemper Clearing Corp.

Some believe their best potential lies on the floor of the Pacific Stock Exchange, where January's daily trading volumes averaged 10 million to 12 million shares. The exchange's most active day so far this year, recorded during the first week of January, saw 14 million shares change hands.

Experts cannot explain the market's recent performance or why new trading records continue to be set. In 1991, trading volume on the Pacific Stock Exchange increased 22.9 percent over 1990 -- the greatest gain of any U.S. stock market, according to Carlson. The New York Stock Exchange recorded a 14 percent rise, the Midwest Stock Exchange 8 percent, the Boston Stock Exchange 1.8 percent and the American Stock Exchange 1 percent for the same 12-month period, while the Philadelphia Stock Exchange's trading volume declined 3.5 percent.

The Pacific Stock Exchange's trading volume on Jan. 27, 1992, was 9.5 million shares, compared to 190 million for the NYSE and 18.2 million for AMEX. Although trading continues to be active, the exchange actually recorded some of its highest volume exchanges in 1991. Its busiest trading week in history was recorded Jan. 6-10, when 60.7 million shares changed hands. This exceeded its previous best set Oct. 19-23, 1987, after the market rallied back from Black Monday to trade at 59.3 million shares.

Positive indicators like these are seen as precursors for a turnaround in the nation's economy, Pally said.

"The market is telling us the future looks pretty good," said Pally, who indicated heavy trading on the stock market usually precedes economic recovery by at least six months.

The Pacific Stock Exchange has struggled to adjust to its own recent growth. In an attempt to establish a competitive edge over the Big Board and others seeking a share of the international equity and options market, it has extended regular operating hours of 6:30 a.m. to 1:30 p.m., by 20 minutes. By year's end, another 20 minutes could be added, with the ultimate goal being to remain open until 5 p.m., Carlson said.

California's centralized geographic position in relation to the Pacific Rim and European markets has enabled it to be a pivotal point for global trading. Considered directly in the center of the world market, it has succeeded in attracting large numbers of foreign investors.

Locally, however, many people are discouraged from making investments. Pally describes that fear as "making an economic commitment" in a time of escalating unemployment rates and state income tax rate hikes.

A further strain is created by businesses taking their money out of the area, in an attempt to escape increased regulation and higher operating costs. However, Pally said he believes the market will remain active as long as interest rates are down.

"The stock market is the only game in town. For investors looking for capital growth, it looks the best, given the liquidity of the market," Pally said.

The Pacific Stock Exchange is a regional auction house formed by a 1987 merger between the Los Angeles and San Francisco stock exchanges. At present, there are 1,700 stocks in its daily trading portfolio. About 1,300 of these stocks are jointly listed on the NYSE and another 200 with AMEX, leaving only between 50 and 60 blue chip stocks and bonds exclusive to the Pacific Stock Exchange. No over-the-counter stocks are available in its portfolio.

Equity trading volume for 1991 rose 22.9 percent over 1990, with a pre-tax net income for the year of $825,000, compared to a net loss of $1,151,000 for 1990. Equity trading volume for 1990 was 1,615,573,440 shares, down 6.3 percent from 1989; and trading volume on options was 13,750,956, a one-year decline in activity of 24 percent. Operating revenues for 1990 were down 13 percent from 1989.

There are a fixed number of seats available on the Pacific Stock Exchange: 551. Selling prices for these seats fluctuate but average between $20,000 and $22,000 each. The most expensive sold for $100,100 in 1987. The least expensive seat changed hands for 25 cents in the early 1970s.

The exchange employs about 400 people. A round of layoffs in 1990 reduced the work force by 45. However, employment figures do not reflect the number of floor brokers and specialists, hired by private companies to conduct trades and represent individual selling interests.

The Pacific Stock Exchange is ranked third nationally in daily transactions and third in worldwide stock option exchanges.