Last Word: John Thain and Jean-François Théodore

Ever since the New York stock exchange and the Paris-based Euronext announced their $20 billion merger last spring, the two firms have been hard at work transforming into the first transatlantic stock market. Shortly after its debut last month, the merger's two main architects, CEO John Thain and deputy CEO Jean-François Théodore, accepted an award for transcultural leadership from INSEAD, the respected French business school. NEWSWEEK's Chairman and Editor-in-Chief Richard M. Smith spoke with them about the opportunities and obstacles they've encountered in building a transnational financial powerhouse even as technology and globalization are rewriting the rules of securities trading. Excerpts:

SMITH: The mortality rate of big mergers is pretty high. What makes you optimistic?
THAIN: Well, it's true that many large mergers have difficulties, but the markets are already global, and the financial institutions who participate in those markets are global. What we have built is the first truly global multi-product exchange group. Combining the largest pool of capital in U.S. dollars and the largest pool of capital in euros will provide better access to capital, better services for our clients. There's no question that the model of a large, global multi-product exchange group is going to be successful.

Are you confident that the two sides will work together smoothly?
THEODORE: I am quite confident. We are delivering the biggest liquidity pool in the world, so it's a sound business case. When we founded Euronext in 2000, we chose English as our language—so we speak the same language, we are in the same business, we have the same philosophy and the same values. I'm quite sure that culturally we will match.

What's American and what's European about the new exchange?
THEODORE: Maybe the organization is more American. You have to remember that board members have fiduciary duties—not to be national, but to be trans-national and to create shareholder value.

And what's European?
THAIN: That's easy. We now serve wine at lunch.


From a regulatory standpoint, is it more impressionistic and European, or very rules-oriented and American?
THAIN: The deal was very carefully structured to maintain the local regulatory authority and local regulatory rules over each of the different markets, so the U.S. pieces continue to be regulated by the U.S. regulators and the European pieces are regulated by their various local regulators. But what's interesting, and quite good, is that the college of regulators that already existed in Europe on the Euronext side developed a good relationship with the SEC, so that we now have a group of regulators that are actually working together in quite a constructive way.

So if we were to have an emerging-market meltdown, or a crisis with Chinese banking, the fact that we're looking at it country by country is not a problem?
THAIN: I think the [European] regulators and the SEC know the world is a very interconnected place, and that what happens in one part of the world can quickly spread to other parts. And so I think the regulators, through their cooperation, take a much broader and global view of the world. Frankly, I think that's good.

Is there still a U.S. -style management approach to business? Or has it become the global style?
THEODORE: I think there is a world standard of management which is strongly American-based, even if we Europeans are not so keen to acknowledge that.
THAIN: I also think that the model for management style has been changed, and I don't think it's necessarily American—I think it's general. The autocratic, authoritative, you know, "I'm the boss and I tell everyone what to do" style is changing. It is much more consensus-driven.

Is this merger a direct result of Sarbanes-Oxley?
THAIN: This deal is a reflection of the globalization of the marketplace thathad occurred before Sarbanes-Oxley. There's no question that having an alternative listing venue, if a company doesn't want to list in the United States, was one of the pluses, one of the attractions of this deal. But Sarbanes-Oxley didn't in any way drive the transaction.

But isn't it fair to say that the new U.S. regulatory regime has discouraged new listings on the NYSE?
THAIN: Yes. It is a combination of Sarbanes-Oxley, competition and class-action lawsuits. Those factors are discouraging some international companies from coming into the U.S. marketplace.

Do you see an inevitable move toward one global exchange in 15 to 20 years?
THAIN: No, not at all. I think that there will be a small number of large, multi-product global exchanges, of which we'll be one. We definitely won't be the only one.