NYSE Chairman Phelan Says He Will Retire, Try a New Career

John J. Phelan Jr., who presided over the New York Stock Exchange during years of massive growth in trading volume and who shepherded the exchange through the 1987 crash, said Thursday that he will retire at the end of this year as chairman and chief executive.

The exchange said its board appointed a committee to begin looking for a successor to fill one of the most prominent jobs in American capitalism. The board is expected to make a choice by late summer.

Phelan, 58, has spent his entire career at the stock exchange and has been chairman and chief executive since 1984. At a press conference, he said he has been thinking about retiring for about a year and wants to start another career, although he doesn’t yet have specific plans. He noted that he will be close to 60 when he steps down, saying, “I thought that perhaps there was another career out there for me and that 60 was a good age to make the transition.”

Phelan said he hadn’t begun looking for another job because he thought it would be inappropriate to look before officially announcing his intention to leave. He said he would consider a wide range of possibilities in the fields of education, charitable foundations and business. Phelan said he chose now to announce his decision because “I thought the exchange was in good shape.”

Phelan is the son of a longtime specialist on the floor of the exchange, and he worked for 23 years as a specialist himself. Specialists are the several hundred individuals who each “make a market” for one or more stocks, matching buyers with sellers. Phelan began his move “upstairs” from the floor of the exchange in 1971, when he was named to the board of governors.

He is credited with having the foresight in subsequent years to see that the volume of securities traded in the United States was about to increase sharply and that the exchange was facing growing competition from rival exchanges and the over-the-counter market. In the 1970s, he began persuading reluctant specialists to go along with a massive program of automation. Later, while he was president of the exchange, he saw that it was successfully carried out.

Perhaps the most controversial decision he made since becoming chairman was to keep the exchange open throughout the trading day on Oct. 19, 1987, when the Dow Jones industrial average plunged a record 508 points. In a well-publicized news conference that day, Phelan said the crash was “the nearest thing to a (financial) meltdown I’d ever want to see.”

Some in government and the securities industry had argued that a trading halt would have softened the crash. But Phelan has maintained that keeping the exchange open boosted investors’ confidence in the ability of the market to function in all circumstances. On Thursday, he said he remained convinced that his decision was right.

The search committee will have to find someone with the diplomatic skills to balance the sometimes widely divergent interests of the four main constituencies served by the NYSE: the Wall Street firms that trade on the exchange, the companies whose shares are listed there, the specialists and other personnel on the trading floor and, of course, the investors.

The specialist system has been under attack in recent years, and some consider it outmoded in the current era of automation. Specialists, who can make big profits from their monopoly in making a market for individual stocks, have been accused of doing a poor job of maintaining smooth trading when their own financial interests were at risk. Phelan said he remained convinced that the specialist system “is the finest in the world.”

Phelan announced his retirement at a time when two other big issues remain unresolved. The foremost is the problem of stock market volatility. The big single-day price swings that have occurred frequently in recent months have been blamed for driving small investors out of the market. A stock exchange committee has been looking into the problem but hasn’t reported yet. Phelan said he believes that a cure for the problem will be found, although he doesn’t yet know what it is.

The exchange also is looking for ways to cope with the host of problems that have developed as the world’s financial markets have become increasingly interrelated.