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Good Greifeld!
Nasdaq CEO's Bet
Is Paying Off

It's been a pretty good run for Bob Greifeld, whose company had one of the best-performing stocks on the Nasdaq last year.

The company? The Nasdaq Stock Market Inc. itself.

Nearly three years ago, Mr. Greifeld took over the then-struggling market, which was reeling from the dot-com stock bust and losing more than $100 million a year. He kicked off what he describes as a "maniacal" cost-cutting program -- eliminating 40% of the staff and slashing spending on everything from advertising to computer gear.

Along the way his blunt personality raised some hackles: His first morning on the job, he fired two executives.

Bob Greifeld of Nasdaq knows his tech; he used to sell software and mainframe computers.

The payoff came last year, when profits bounced back. So did the Nasdaq market's share price, which nearly quadrupled, giving it the best total return of the 1,000 largest stocks in the Dow Jones Total Market Index.

Now comes the hard part.

The 48-year-old chief executive must prove that he's not just a cost-cutter but can close the gap between underdog Nasdaq and the larger New York Stock Exchange, the world's biggest as measured by the market value of its companies. He also must make sure that Nasdaq can successfully digest its purchase last year of Instinet Group Inc.'s trading system, while deciding whether to expand further abroad amid a flurry of talk of potential deals with overseas exchanges.

The NYSE and its merger partner Archipelago Holdings Inc. have combined revenues more than twice that of Nasdaq's, and NYSE-listed companies have a market value more than five times Nasdaq's companies. Most large companies still prefer to list their shares on the 213-year-old NYSE because while Big Board listings cost more, they not only offer the prestige of the name, but also higher standards for accepting a stock listing, which companies then can boast about meeting.

It's a crucial time for the business of running stock markets -- particularly as they are trying to become more technologically savvy. Nasdaq is already an electronic market -- a web of traders connected by computers -- but the Big Board is trying to catch up with its own plan to blend electronic trading with its more-traditional system of brokers working on a trading floor and hammering out deals with each other. Last week, investors sold off Nasdaq shares from their record high after Mr. Greifeld announced a growth forecast less optimistic than expected.

Mr. Greifeld is the first Nasdaq chief to come not from Wall Street, but from the technology industry -- for years he sold software and mainframe computers. "I've never had a long-term career plan," says Mr. Greifeld, who presses employees to think of stock trading as a technology business.

Mr. Greifeld and the NYSE's chief executive, John Thain, are a contrast in styles. Mr. Thain is an MIT-educated former Goldman Sachs executive. He speaks of leading a wave of global consolidation among exchanges that will bring together stocks, bonds, options and other derivatives. Mr. Greifeld plays down such megamergers, saying in an interview from his 50th-floor offices in lower Manhattan that "what's going to be written about me when I'm done here is that we focused on our opportunity to change the way stocks are traded in the U.S."

In his spare time, Mr. Greifeld, in perhaps an odd choice for someone in the business of speedy trading, is a collector of turtles, which are kept in the yard behind his New Jersey house. A trademark touch: he occasionally wears turtle cufflinks. He has also run four marathons. "He's fiercely competitive," says Mike Bingle, a managing director at Silver Lake Partners, a major Nasdaq investor, "but it's not as well known that he's a world-class technologist."

Aiming some of that competitive energy at the NYSE (which he pronounces "nicey"), Mr. Greifeld recently invested in an insurance brokerage firm, an investor-relations company and a stock-research joint venture to make Nasdaq more helpful to the companies that list shares there. The hope is that the Instinet deal, which brought in a sizable chunk of new business, will also speed up trading.

Some analysts question the amount of debt Nasdaq has taken on to do those deals. The acquisitions added about $80 million to Nasdaq's projected expenses in 2006, analysts say. And Nasdaq increased its long-term debt to $1.18 billion at the end of 2005 from $265 million the previous year.

The debt load could hinder Nasdaq's ability to do large deals or give it less cushion if Mr. Greifeld's expansion plans for Nasdaq don't work out. Nasdaq officials say it can handle the debt.

Other industry experts raise the question of whether Mr. Greifeld should instead be using Nasdaq's lofty share value to expand by doing more acquisitions and pushing into new businesses such as options trading. That strategy, they say, might help them compete more aggressively with the NYSE, which is buying Archipelago Holdings, an operator of stock and options exchanges.

Mr. Greifeld says he's confident that the stock-trading business has room to grow, but he doesn't rule out getting into new businesses. In recent months, Mr. Greifeld has looked at possibly buying a currency-trading system and the London Stock Exchange PLC. Options exchanges also "are in the sphere of things we'd consider," he says. For the moment, he says Nasdaq is content with its less flashy plan to send options orders to other exchanges starting later this year.

As the NYSE makes itself more electronic, that could steal some thunder from Mr. Greifeld's push to take business from the Big Board.

The NYSE has long argued that its floor-based auction model of trading leads to better, less volatile prices. But many large investors and rapid traders prefer to buy and sell stocks on Nasdaq because it's speedier.

In 2004, Mr. Greifeld launched a program offering NYSE-listed companies a chance to list their shares on Nasdaq too. Some criticized the move as an empty gesture since Nasdaq didn't charge fees to companies the first year. But last fall, two of the dual-listed companies -- Charles Schwab Corp. and Cadence Design Systems Inc. -- dropped their Big Board listing and stayed with Nasdaq. For the first time last year, the market value of companies moving to Nasdaq from the NYSE outweighed the value of companies moving the other way.

A native of Queens, New York City, whose father worked as a mailman, Mr. Greifeld spent 12 years selling computers for Burroughs Corp., which later became Unisys. He earned an M.B.A. at New York University's Stern School in 1986 after writing a paper about how Nasdaq would eventually switch to computer networks from phones.

On a sales call early in his career, Mr. Greifeld visited Mayer & Schweitzer, a big Nasdaq stock dealer. But despite weeks of work, Mr. Greifeld lost the account to a rival firm. "We were severely disappointed," he recalls.

In 1991, he left for Automated Securities Clearing, a small business specializing in software for Wall Street trading desks. The company grew and was later sold to Sungard Data Systems Inc., where Mr. Greifeld served as executive vice president and oversaw divisions with about 3,000 employees, including an electronic-trading firm that competed with Nasdaq. In 2003, Mr. Greifeld told Sungard's president, Cristóbal Conde, that a headhunter had approached him about the top post at Nasdaq. "This was his dream job, so I knew if he got the job," he'd take it, Mr. Conde says.

Write to Aaron Lucchetti at aaron.lucchetti@wsj.com