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The Brain in Thain


The news got worse once Thain set up shop in his sixth-floor office. Profits fell 50 percent during his first year on the job. Most of the hit involved the millions of dollars in legal fees the exchange had run up trying to reclaim money from Grasso and a marketing blitz aimed at putting the scandal behind it. But few were giving the NYSE the benefit of the doubt. The going rate for a seat on the exchange—that is, the franchise that entitles its owner to operate on the floor—had plummeted to about $1 million from $2.7 million in 1999.

Somewhat perversely, it was precisely this mess that had attracted Thain to the job. Thain’s final years at Goldman had been an exercise in dignified leadership. He was the senior-most Goldman official in New York on 9/11, and former colleagues still rave about his handling of the crisis. “I do remember thinking that, after 9/11 … if I could pick any one person to sit in that seat, I would have picked Thain,” says Dan Neidich, then a Goldman partner. “He not only saw big-picture, but he knew all the details.” His résumé glistened with the affirmation of elite board membership: MIT (his alma mater), Howard University, New York–Presbyterian Hospital. Thain had been so compelled by what he calls the “quasi-public service” aspect of the NYSE job that he’d agreed to take a $16 million pay cut from the $20 million he made in his final year at Goldman. (“I certainly didn’t do it for the money,” he told me.)

From Thain’s perspective, the NYSE’s problem wasn’t difficult to diagnose. When at Goldman, he’d been critical of the exchange’s uncanny knack for holding off modernity. Thain is an engineer by training. He was particularly galled by the snail’s pace of trading, especially given that a new breed of electronic exchanges had moved in aggressively on the NYSE’s turf. These exchanges traded stocks at the speed of light, rather than the speed of human typing, which didn’t seem like too much to ask of a 21st-century institution. He began to think that the exchange’s best hope was to acquire one.

In January 2005, Thain invited Gerald Putnam, the CEO of Archipelago, one of the most successful of the new exchanges, to lunch at the Goldman executive dining room. At first glance, Archipelago seemed like an odd choice for an acquisition. Ever since he’d founded it in 1996, Putnam had missed few opportunities to taunt the NYSE. He bashed the exchange as a dinosaur and boasted that Archipelago had “pretty much kicked their butt” in new market niches. Putnam once even hired a songwriter to help express his loathing for the specialists. One particularly moving passage went “Joey the Specialist/Seems to have all the good luck/He’d penny his grandmother/Just to make himself a quick buck.”

Personally, too, the men seemed unlikely collaborators. Thain was mild-mannered, modest, circumspect. He’d joined Goldman out of Harvard Business School in 1979 and spent the next two and a half decades methodically climbing the corporate ladder. He’d pass his spare time holed up in his Rye, New York, home. Until this July, when he purchased a Park Avenue duplex listed at $27.5 million, Thain seemed remarkably devoid of extravagance. Putnam, by contrast, arrived on Wall Street as a broker in 1981 and proceeded to shuffle from job to job over the next seven years—twelve firms in all. He could be volatile, rash, profane. The New York Post once reported that he’d decorated the walls of his office with pinups of nude women—Pamela Anderson was among his favorites.

But Putnam was above all a pioneer, and he had several things Thain needed: a lightning-quick trading technology, and a growing business in high-margin products like futures and options. (Exchanges make money by charging companies listing fees and by taking a cut of each trade; the cut is much higher for proprietary products, like futures, in which they have a monopoly.) “Arca,” as it’s called on the floor, was also a public corporation, meaning that the acquisition could simultaneously make the NYSE public, too. Perhaps most important, Thain believed his staid, self-satisfied institution needed a shake-up if it was going to survive. Arca’s bomb-throwing ethos seemed like the perfect antidote.

Thain and Putnam announced the rough outlines of a deal in April 2005. The newly merged New York Stock Exchange Group began offering shares to the public (ticker symbol: NYX) on March 8, 2006. By the end of the first day of trading, an NYSE Group share was worth $80, bringing the company’s market capitalization to a jaw-dropping $12.6 billion.

Among other functions, the NYSE is a ceremonial destination on a par with the White House, or Disney World. There’s a waiting list several hundred companies long for the privilege of ringing the opening bell, and each CEO or luminary who does so leaves a souvenir. Thain’s office is filled with bric-a-brac. On the far wall is a floor-to-ceiling bookshelf stuffed with trinkets: several autographed basketballs (the NCAA champions typically stop by), a racing helmet from Nextel, a nascar sponsor.


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