With Grasso Gone, Who Stands to Gain?

It's axiomatic there are two sides to every trade. So with the ink barely dry on Richard Grasso's resignation as chairman of the New York Stock Exchange, some are already contemplating the potential beneficiaries.

Some will argue that "justice" has been served by Grasso's resignation, which, as widely reported, followed revelations of his outsize pay package. If as California Treasurer Phil Angelides said Tuesday, Grasso's departure was necessary for the Big Board to "restore its moral authority" and re-establish "the credibility of our financial markets," then all investors have won.

Indeed, some individuals may take solace that positive change is occurring, and that regulators such as the Securities and Exchange Commission's William Donaldson are working to reverse the egregious excesses of the bubble era (and its aftermath). A generous soul might partially attribute Thursday's strong advance to such heightened investor confidence.

But Wall Street is not a touchy-feely place, and the most likely beneficiaries of Grasso's demise are the NYSE's competitors, namely the Nasdaq and electronic communications networks (ECNs).

In a statement, the Nasdaq Stock Market said: "We hope this difficult decision will allow the NYSE to focus on and successfully address the complex governance, ownership and operational issues it faces. It is important to the integrity of the capital markets that it do so."

Broadly, the Nasdaq and the Big Board differ operationally in that the former is a decentralized, computerized trading platform while the latter is still dominated by human beings, known as specialists.

"Dick was a fierce, intelligent, compassionate competitor. It's like Michael Jordan retiring," said Jerry Putnam, chief executive of Archipelago, one of the four original ECNs approved by the SEC in 1997. This year, the firm migrated trading of over-the-counter securities from the ECN to its "ArchaEx" exchange platform, which handles more than 30% of daily volume in big-cap names such as Microsoft (MSFT) and Cisco (CSCO).