Richard A. Grasso seems like the consummate corporate insider, ascending to chairman of the New York Stock Exchange after 27 years in staff positions. But the new Big Board boss doesn’t talk like it.
Far from micro-managing the world’s largest stock market, Grasso said in an interview before he formally takes over today that he will reach well outside Wall Street in a broad bid to sustain the NYSE’s dominance.
The new chairman hopes to double to 500 the number of foreign companies listed within three years and make the biggest staff addition since a retrenchment four years ago. He also intends to shuffle senior management, making it easier for Grasso to travel for soliciting new business.
“Insider is somewhat of a misnomer,” Grasso, 48, said in his final day as NYSE president, citing a long resume of positions that included recruiting U.S. companies to list on the exchange. “I know the franchise from the bottom up.”
Yet Grasso, who is considered less influential in Washington and overseas than his predecessor, William H. Donaldson, has his work cut out for him.
Donaldson’s reign was ushered out with a powerful stock-market rally Wednesday; the stock surge, though tied to economic releases and not the changeover, was capped at the closing bell by a lusty exchange-floor cheer as the incoming and outgoing leaders embraced before television cameras.
But as the new chairman looks abroad for growth, domestic rivals are nipping in an increasingly zealous bid to steal NYSE’s stock-trading volume. The guard change occurs amid some lukewarm press coverage of the daunting challenges facing the exchange and its new chairman.
Threats to NYSE’s dominance have been well-publicized - particularly from the arch-rival Nasdaq stock market, a computerized system of trading securities that in recent years has grabbed increasing share of volume from the venerable 203-year-old exchange.
The Wall Street Journal reported Wednesday that many of the nation’s largest securities firms - the NYSE’s own members are trying to pull business away from the Big Board to regional exchanges and electronic markets, where there’s more room for them to profit from stock trades.
Responding to the story, Grasso said the NYSE will aggressively fight practices by regional stock exchanges that he considered unfair, raising them with the Securities and Exchange Commission, the federal market regulator.
Nevertheless, Grasso said, “If market penetration is being gained elsewhere, it means we have failed to deliver.”
Further, there is limited potential for growth among new U.S. corporate listings on the exchange.
The NYSE estimates there are at most 575 U.S. companies that meet the exchange’s standards but are currently listing elsewhere - enough to add just 10 percent to the market’s current capitalization of about $5 trillion.
But the potential overseas business is staggering: If just the top one-third of the roughly 2,200 qualified foreign companies were to list on the NYSE, it would nearly double the market’s capitalization, Grasso said.
The head of the nation’s securities industry watchdog is generous in his praise of Grasso. In a recent trip to the Far East to woo foreign businesses to U.S. markets, SEC Chairman Arthur Levitt recalled in a phone interview, Grasso “was one of the best salesmen I have ever worked with.”
To free him for life on the road, the new management structure at the NYSE will spread out decisionmaking among more top executives. Included in the new structure is an as-yet unchosen president to replace Grasso, probably from among the exchange’s three group executive vice presidents. The selection will be made in the next six to 24 months, he said.
Grasso also plans this year to add about 50 employees to the exchange’s 1,450 staff, in part to support the global marketing push. It would be the biggest staff increase since the exchange shed 20 percent of its work force in 1991 to cut costs.