Ab initio molecular orbital calculations at the G2 level of theory have been used to characterize the potential energy surface for the reactions of phosphirenium or phosphiranium ions with acetylene or ethylene. Comparisons between two competing pathways for pi-ligand exchange are discussed along with comparisons between the lower energy exchange pathway and a competing insertion reaction. The lower energy exchange reactions have barriers (4-39 kJ mol(-1)) much smaller than those of the insertion reactions (215-234 kJ mol(-1)), despite the fact that the insertion products are strongly preferred thermodynamically. This is consistent with the exclusive observation of exchange experimentally. The transition structures for the preferred exchange reactions contain PH2+ moieties that are rotated so that they are almost parallel to the CC bond of the ring and the CC bond of the incoming hydrocarbon, leading to the prediction that the reactions are stereospecific with respect to the configuration at phosphorus.