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John Thain To Merrill: What's It Mean For NYSE?

We are waiting to hear the outcome of the NYSE's unscheduled board meeting. Let's assume that John Thain is indeed leaving to go to Merrill Lynch,as has been reported.

Questions for the NYSE :

1) Will the stock take a hit? Deutsche Bank analyst Rob Rutschow noted, "We feel that at least some investors were buyers of NYSE because of John Thain. With his departure, we believe investors may now look more to results, which may be somewhat less impressive than the persona of John Thain." Stock dropped initially, now moving up midday.

2) Is NYSE still committed to a derivatives acquisition like the Nymex? Bank of America CEO Chris Allen noted that while co-COO Duncan Niederauer was a strong candidate to replace Thain, he noted that "if Duncan is named CEO, he may be less inclined to pursue deals than his predecessor." Because of concerns about earnings dilution, this could be a positive for NYSE stock, Allen says. And, by implication, a negative for the Nymex, widely regarded as a likely buyout candidate. Nymex down 3%

3) Will Marsh Carter, chairman of the board, assume a more important role?

John Thain's major accomplishments during his nearly four years at the NYSE:

1) Demutualizating the NYSE and taking it public. While this was controversial, and destroyed much of the clubby comraderie of the NYSE, it ultimately made a lot of money for seat holders (who became shareholders), brought more value to the franchise, and helped put much of the controversy around Richard Grasso behind it.

2) Buying Archipelago and moving the NYSE toward electronic trading. The NYSE's customers were demanding more electronic trading and were already voting by moving business to electronic communication networks (ECNs); Thain bought Archipelago and then created the Hybrid system to allow both electronic and floor-based trading.

3) The first transatlantic exchange deal, the merger with Euronext. Thain early on realized that the battle would be over global control of listings, and he recognized that the equity business was flat, while the options and futures business was thriving. Buying Euronext accomplished both, getting access to the main exchange on the continent, along with a thriving derivatives business. Since then, they have a 5% piece in the National Stock Exchange in India, a small piece of the Brazilian Bovespa, and a strategic partnership with the Tokyo Stock Exchange.

Criticisms:

--Did not go far enough on electronic trading. Some have argued the NYSE Floor should have been closed and the exchange moved completely to electronic trading.
--NYSE has lost market share under his tenure, going from over 80% to below 60% share in stocks it lists.

Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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