NYSE Chief sees automated future at exchange
Thu Dec 18, 3:25 PM ET
By Gary Silverman and Andrei Postelnicu in New York
John Thain yesterday said he believed automated systems would play an increasingly important role in processing trades at the New York Stock Exchange (news - web sites) but that changes in market structure should be "more evolutionary than revolutionary".
The question of what to do with the NYSE's specialist system, which involves people processing trades, will be one of the most important issues facing Mr Thain when he takes up his po st as chief executive of the NYSE in mid-January.
He will have to work closely with the Securities and Exchange Commission (news - web sites), which is leading an investigation into alleged trading violations among the specialist firms. An unpublished report from the SEC estimated that improper trading prejudiced investors of about $155m, while a lawsuit from Calpers, the influential public pension fund, seeks restitution of a larger amount.
Mr Thain will have to first work with the SEC to determine the scale of the ill- gotten gains then implement a system for restituting them to investors. He may pursue the idea of a compensatory "super fund" brought forward by Mr Reed.
For a Wall Street banker, Mr Thain brings unusual perspective to technological questions. He was trained as an electrical engineer at the Massachusetts Institute of Technology (news - web sites) and has overseen operational issues at Goldman Sachs.
In an interview, Mr Thain pledged to keep "an open mind about what the right structure will be".
"I think it is likely that more of the transactions will be done electronically," he said. "But I believe there is a very important role for the specialists."
Executives at the specialist firms have said in the past they expect their role to change significantly. LaBranche & Co, the biggest specialist firm, has spent millions developing new technology for automatic matching of some orders.
Mr Thain said discussions about the future of the specialist system were not a focus of his talks about his new job with Mr Reed.
"He views himself as an interim chairman," Mr Thain said. "It was not his role to get into market structure."
Mr Thain said the governance structure of the NYSE was in need of revolutionary change, but questions of market structure could be dealt with at a more leisurely pace.
"You absolutely had to have a change in the governance structure," he said. "On the market structure, it's more evolutionary than revolutionary."
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