(Bloomberg) - Robert J. Birnbaum, who headed both the American Stock Exchange and the New York Stock Exchange during a 27-year career in market regulation and administration, has died. He was 94.
He died on Dec. 23 at his home in Boca Raton, Florida, after a long illness, his wife, Gloria, said in an interview.
Other than their New York locations, the NYSE and the Amex shared little, besides Birnbaum’s leadership. The much smaller American exchange was founded by traders unable to afford membership in the New York exchange.
While at the American Stock Exchange, in 1984, Birnbaum played a role in a high-profile case of insider trading.
Birnbaum said he learned through staff about “a good number of situations where a stock moved dramatically” shortly before being mentioned in R. Foster Winans’s “Heard on the Street” columns in the Wall Street Journal. Birnbaum passed the information to the SEC. Winans was charged with fraud and convicted and spent about nine months in prison.
Merger Talk
Birnbaum’s 1985 move from the Amex, led by Arthur Levitt, to the NYSE, succeeding John Phelan (who became chairman), stoked speculation that the two exchanges would finally merge. Instead, they remained independent until 2008, when the NYSE’s parent, NYSE Euronext, took over the Amex. Phelan died in 2012.
New York Stock Exchange people “had always looked down their noses at the Amex -- ‘That’s not our quality guys on the floor over there,’ you know?” Birnbaum said in a 2007 interview with the Securities and Exchange Commission Historical Society. “But regarding a merger, they’re probably right. What’s in it for New York? If you’re a member on the floor, what the heck is in it for you? So there wasn’t much push for it.”
Birnbaum’s move was, the New York Times reported at the time, “apparently the first time a senior official of one exchange has moved to a senior post at the other.” Birnbaum felt it necessary to tell the Times that he carried no “secret merger plan.”
Black Monday
With Phelan, Birnbaum he helped maintain order and calm nerves at the NYSE on Black Monday -- Oct. 19, 1987 -- when the Dow Jones Industrial Average lost 508 points, or 22.6 percent.
“We sort of divided things,” Birnbaum said. “Phelan was talking to the Fed and to the White House, and I was talking to all of the exchanges to keep them apprised as much as I could of what was going on. But nobody really knew.”
He said the exchange made a wise call in directing trading firms to halt their program trading -- large, automated buy and sell orders to take advantage of small discrepancies in price.
Robert Jack Birnbaum was born on Sept. 3, 1927, in New York, the son of Joseph M. Birnbaum and the former Beatrice Herman, according to Marquis Who’s Who.
He received a bachelor’s degree in business administration from New York University in 1957 and a Bachelor of Laws degree from Georgetown University, in Washington, in 1962.
GAO Job
His professional career began at the U.S. General Accounting Office, known today as the Government Accountability Office. He moved to the SEC in 1961 to help conduct the Special Study of Securities Markets, which Congress had ordered. He worked on sections of the study related to the over-the-counter market, and once the report was completed he became a branch chief for OTC regulation.
An SEC colleague, Ralph S. Saul, became president of the American Stock Exchange in 1966, and Birnbaum followed him there. He worked his way up to president and chief operating officer, a position he held from 1977 to 1985. Saul died in 2016.
In 1975, the Amex began trading in options, joining the Chicago Board Options Exchange.
“You have to remember, in the early ’70s the equity business was dying,” Birnbaum said in the SEC interview.
Circuit Breakers
In the aftermath of Black Monday, Phelan helped implement so-called circuit breakers to interrupt a crashing market, but he opposed more dramatic changes and described what happened as an inevitable correction to overly high stock prices.
Birnbaum disagreed. He called publicly for banning index arbitrage and considering limits on the size of big firms’ portfolios -- “radical recommendations” that would have “put the exchange on a collision course with the big trading houses and with at least some of its specialists,” Tim Metz wrote in “Black Monday” in 1988.
Birnbaum left the NYSE when his contract expired in June 1988. “I’ve had about enough of stock exchange work,” he said at the time, according to Metz. “I want to leave while there’s still enough time to do something else.”
From 1988 to 1994, he was special counsel at law firm Dechert Price & Rhoads, now called Dechert, in New York. The Chicago Board Options Exchange named him a director in 1997.
With his first wife, Joy, who died in 1990, he had two children, Gregg and Julie. He was stepfather to three children, Jeremy, Simon, and Jenny, through his second marriage, in 1993. He is also survived by seven grandchildren.
By Laurence Arnold
