What do floor members of the New York Stock Exchange have in common with French President Jacques Chirac? The answer: John Thain.
In a little less than two-and-a-half years, the Big Board chief executive has managed to leave all of them chagrined -- the floor members by his effort to push the exchange toward greater automation, chiefly through this March’s merger with Archipelago Holdings, and Chirac by his bid to move into truly global trading, as well as derivative products, through last month’s announced hookup with Euronext, which left the French leader publicly fishing for a rival bidder.
Thain agreed to take the helm of the NYSE at arguably its darkest time, the end of 2003, leaving behind a far more lucrative post at Goldman, Sachs & Co., where he was heir apparent to CEO Henry Paulson Jr. Thain arrived shortly after former Big Board chairman and CEO Richard Grasso had departed, following the revelation of his stunning compensation package, and several specialist firms had been fined for trading violations that impugned the integrity of the exchange’s vaunted auction system.
The reputation of an American icon was in tatters. Its business dominance was weakening as well, as its share of trading in its listed stocks slipped to all-time lows.
Restoring the NYSE’s luster, and power, was a job that cried out for a superhero in finance. Thain, as Senior Editor Justin Schack explains in this month’s cover story (“The Adventures of SuperThain,” page 46), has met the challenge head-on, beginning by turning the exchange into a public company and subjecting it to the scrutiny of the marketplace for the first time.
Thain’s bold moves, including his attempt to push into new products and locations, don’t come without risk. The Euronext deal could still fall through, and even if completed, it’s not clear how smoothly the combined entity will operate with multiple trading platforms and regulatory regimes. Worse, new U.S. trading rules that go into effect next year threaten to exacerbate the Big Board’s market-share losses. Thain’s solution -- a hybrid of floor and automated trading -- hasn’t been received well so far.
“Thain has done a great job of modernizing the exchange and repairing its image,” says Schack. “But he hasn’t shown that he can stop the decline in the NYSE’s core business. So he has to act boldly to broaden its business model with deals like Euronext.”
The exchange’s future may hinge less on its trading efficiency than on the deal-making prowess of its CEO. This, clearly, is the job for John Thain.
