John Phelan, NYSE Chief Who Ushered in New Technology, Is Dead at 81
John J. Phelan Jr., a former chairman of the New York Stock Exchange who introduced computer technology to the Big Board in the 1980s and was widely praised for his calming response to the stock market crash of October 1987, died on Saturday in Manhattan. He was 81.
The cause was complications of prostate cancer, his son Peter said.
After the 1987 crash, which shook investors' confidence in financial markets, Phelan coolly resisted calls to close the exchange, fearing that it would breed further panic. He rang the closing bell himself.
"He deserves eternal credit for that, Felix G. Rohatyn, a longtime investment banker who helped save New York from bankruptcy in the 1970s, told The New York Times on Phelan's retirement in 1990. "That was his shining hour."
The crash, which quickly became known as Black Monday, represented what is still the market's largest single-day percentage drop, with the Dow Jones industrial average plunging nearly 23 percent. In its aftermath, Phelan became the public face of the stock exchange, seeking to assure a nervous country that confidence in the markets was justified. In a message to Phelan several days after the crash, President Ronald Reagan praised the functioning of the exchange during the panic. Phelan read the message aloud to his staff from the podium overlooking the trading floor.
"The calm, professional manner of dedicated men and women striving to meet unprecedented challenges undoubtedly helped assure investors of the soundness of the institution," Reagan wrote.
Phelan, known as a soft-spoken and private man, oversaw the exchange throughout the 1980s, first as president from 1980 to 1984 and then as chairman and chief executive from 1984 to 1990.
As trading volume exploded in the 1980s, Phelan introduced new technologies to the once-stodgy exchange. Under his leadership, the exchange spent millions to put in place electronic systems to handle huge volumes of orders.
The technological changes helped usher in a new era on Wall Street. Computerized trading lowered costs for small investors and helped make markets more liquid.
In recent years, new technologies have also introduced new risks. Those risks were on display last week with faulty trading at Knight Capital , as well as during the 2010 flash crash, when technical problems with orders led the Dow Jones industrial average to fall 700 points in just a few minutes.
In the aftermath of the 1987 crash, Phelan helped introduce circuit breakers to the market, which curbed volatility. In an interview with The Times after the crash, he outlined his concerns about the culture that developed on Wall Street during his tenure.
"The markets are not for individual professionals to make money in. They are really for corporations to raise capital so you can invest in this country and get a better standard of living," he said. "If we destroy the markets by too much volatility, too much professional trading, too much leverage, we ruin their credibility and we ruin the function for which they are supposed to exist."
The insider trading scandals of the 1980s also cast a spotlight on the stock exchange. In 1986, after revelations of insider trading by the financier Ivan F. Boesky, Phelan said in testimony prepared for a House of Representatives panel that the stock exchange did not have the ability to discover insider trading, even though it could spot unusual trading patterns.
Phelan said at the time that the Big Board had spent $20 million on audit and surveillance systems. But he acknowledged that the organization relied on its member firms to police themselves. "In the case of Ivan Boesky, an important link in the system failed," he said.
John Joseph Phelan Jr. was born on May 7, 1931, in New York City. He got his first taste of Wall Street at the age of 16, when he worked for his father's firm as a runner, a job that involved shuttling order tickets and other papers, during his summer break. He hated the experience and told his father that finance was not for him, he recalled in a 1990 interview with The Times.
But after serving as a sergeant in the Marines in Korea, he began a career on Wall Street in 1955. He eventually became managing director of Phelan & Company, his father's specialist firm, one of the firms that supervise trading of individual stocks on the floor of the exchange. He graduated from Adelphi University in 1970.
Phelan was named vice chairman of the New York Stock Exchange in 1975, and four years later he led the creation of the New York Futures Exchange, which he ran as chairman.
Phelan had become a widely respected financial figure by the time he retired, accepting positions on various corporate boards, including that of Merrill Lynch . In recent years he was chairman of Catholic Charities, an organization that serves disadvantaged New Yorkers.
He is survived by his wife, Joyce, and three sons, John, Peter and David.