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Gerald Putnam parlayed an idea for an electronic trading network a decade ago into a successful stock exchange, defying predictions it wouldn’t be able to compete with the giants. Now the ex-stockbroker has negotiated a merger with the best-known of those giants, the New York Stock Exchange. The 46-year-old Putnam, founder and CEO of Archipelago Holdings Inc., initiated the deal and is to help oversee the rival NYSE in its transformation to a for-profit exchange. But even he, an experienced deal-maker, had doubts when two other executives of Chicago-based Archipelago suggested this one. “I dismissed it at first,” he said in an interview Thursday with The Associated Press. “It takes a whole lot to get one of these things done. … I guess I was very skeptical, and I thought about it for a couple of days. So one day in January, I saw I was going to be in New York and I told my secretary to call (NYSE Chief Executive) John Thain and set something up.” Putnam is a rebel with a checkered resume — fired twice as a stockbroker, sued twice by two former business partners. But the deal announced Wednesday confirmed his reputation as a hard-driving manager who can make big ideas happen. It also will make a wealthy man much richer. Putnam, who made $4.8 million in salary, bonus and other pay at Archipelago last year, owns more than a million shares of his company’s stock, not counting options. The company’s shares soared $11.20, or 60 percent, Thursday to close at $29.96. Ned Bennett, who worked with Putnam when he was a stockbroker in the early 1990s, said Putnam has always been a risk-taker with an eye toward the future. “He always knew where he was going with his business and what he eventually wanted to help create,” said Bennett, chief operating officer of OptionsXpress Holdings Inc., a Chicago-based online broker specializing in options. “He is the kind of guy who, if you built a rock wall in front of him, he’d figure out a way to get around it or over it.” A native of Philadelphia, Putnam got an economics degree with a major in accounting from the Wharton School at the University of Pennsylvania, where he also rowed for the crew team. He then worked at several major brokerage firms in New York and Chicago, where he has lived since 1985. He has said he was fired by two of those firms — Oppenheimer & Co., where he wasn’t producing enough, and Prudential Financial Inc., which dismissed him in a dispute over whether authorization had been granted for a large futures trade he made for a client. “I’d much rather be in control,” he told Business Week last year. Bennett, who was president of Geldermann Securities Inc. when that firm hired him, concluded Putnam had done nothing wrong and was quickly convinced of his talent and ability to generate a large amount of business. “Jerry knows the derivatives market as well as anyone I know,” he said. “Some people would call him a renegade; I’d call him more of a pioneer. … He knew there was a niche (with derivatives) and went after it.” Moving into electronic trading, Putnam founded online broker Terra Nova Trading LLC in 1994 and got the idea for Archipelago two years later, combining old-economy investors with the idea for an innovative electronic communication network. One of the original four electronic exchange networks, ArcaEx was founded in late 1996 and went public last August, promising investors better deals by using technology to match buy and sell their orders for stocks. Taking on the established NYSE and the Nasdaq Stock Market, Putnam successfully outmaneuvered other electronic networks. Along the way, he made some enemies with his driven style, resulting in a pair of lawsuits from ex-partners who missed out on Archipelago’s stellar rise. Lewis Borsellino, a former business partner in CTA who has castigated Putnam as a “car salesman,” sued him and other former CTA executives in 2000 for allegedly diverting assets to their other business ventures. Fane Lozman, who was a business associate of Putnam in Terra Nova, sued him for wrongful conduct and “usurped corporate opportunities.” Putnam says the suits, which remain unresolved, are without merit. After grabbing a significant share of trading volume from the big markets, Putnam voices characteristic confidence about the future. He even sounds a tad brash about marrying off small, automated Archipelago to the august NYSE, which he refers to as “a country club.” “Obviously, New York has a tremendous brand,” he said. “There’s a huge opportunity for listing, an immense amount of credibility and the ability to launch new products. On our part, we certainly have great technology systems, smart people, an entrepreneurial spirit and a commitment to customer-friendly service.” “I know there’s some cultural differences, but I believe it’s going to work. … I see a bunch of excited people over there when I walk the halls. And they understand how a public company can reward them. That’s what’s going to make it work.” AP Business Writer Michael J. Martinez contributed to this report. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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