Robert Birnbaum, Architect of Modern-Day Financial Markets, Dies at 94

He was renowned for his steady hand during the 1987 stock market crash. He later helped design circuit breakers to calm future panics.

He was renowned for his steady hand during the 1987 stock market crash. He later helped design circuit breakers to calm future panics.

Robert J. Birnbaum, who as president of the New York Stock Exchange was credited with helping to navigate a major financial crisis during the U.S. stock market’s plunge on what became known as Black Monday in 1987, and who later helped design market circuit breakers to head off future panics, died on Dec. 23 at his home in Boca Raton, Fla. He was 94.

His son, Gregg Birnbaum, said his death followed a long illness.

Mr. Birnbaum spent his career on Wall Street, but not as a captain of industry; rather, he was one of its most reliable stewards. After studying the mechanics of marketplaces in the mid-20th century as a member of a special team at the Securities and Exchange Commission, he helped reshape exchanges while presiding over two of them: the American and New York stock exchanges.

When U.S. stock prices fell more than 22 percent on Oct. 19, 1987, Mr. Birnbaum’s clear, firm public comments on how long trading on the New York exchange would be halted — it was frozen that day but reopened on a normal schedule the next day — helped soothe investors and prevent a frenzied sell-off from continuing.

In the days that followed, Mr. Birnbaum played a crucial role in bringing the leaders of various exchanges, including the Chicago-based options marketplaces, together to hash out what had happened and how such a crisis could be averted in the future. With other exchange leaders, he designed a series of rules governing when to stop trading, and for how long, in the event that prices were falling too far and too quickly.

“He wanted to bring the best out of people and nurture them,” said William J. Brodsky, one of Mr. Birnbaum’s prot?g?s, who later served as chief executive of both the Chicago Mercantile Exchange and the Chicago Board Options Exchange. “Unlike a lot of the egos on Wall Street wanting it to be all about them, this was about making it all better.”

Robert Jack Birnbaum was born in the Bronx on Sept. 3, 1927, to Jewish parents who had immigrated from Russia. His father owned a furniture store; his mother did various bookkeeping jobs.

After graduating from DeWitt Clinton High School, Mr. Birnbaum attended New York University and later went to law school, completing his first year at the University of California, Berkeley, before transferring to finish his law degree at Georgetown University.

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Mr. Birnbaum appeared before the New York State Legislature in 1979 to discuss a new location for the American Stock Exchange, of which he was president at the time.Credit…Neal Boenzi/The New York Times

He spent the early part of his career at the General Accounting Office (now the Government Accountability Office) before moving to the Securities and Exchange Commission, where he became the head of regulation in the New York office in 1961. He was part of a team of S.E.C. officials who produced a deeply focused study of the mechanics of the securities markets. The study’s recommendations led to a transformation in the structure of financial market exchanges after Congress wrote new legislation based on the report that let exchanges regulate themselves.

As his friend Kenneth R. Leibler, another of his prot?g?s, put it, Mr. Birnbaum “served as forerunner to the establishment of the National Market System.”

The system Mr. Birnbaum helped conceive is one in which trades in stocks and stock options are cleared in a central facility put in place to make sure that each trade’s two sides match up properly, and in which there is a national price quotation mechanism that gives market participants everywhere an accurate reading of how prices are moving.

After leaving the S.E.C., Mr. Birnbaum went to work for the American Stock Exchange in 1967; 10 years later, he became its president. In 1984, he alerted the commission to some unusual trading activity ahead of the publication of a regular Wall Street Journal column, “Heard on the Street,” by R. Foster Winans. An investigation revealed that Mr. Winans had been giving a stockbroker notice of the contents of his columns before publication, in exchange for money. Mr. Birnbaum’s tip turned into one of the most high-profile insider trading cases in history.

Mr. Birnbaum was lured away by the American exchange’s larger rival, the New York Stock Exchange, in 1985. He was the first executive to leave one for the other.

In a 1988 Washington Post article in which he reflected on his time working on the markets report for the S.E.C., Mr. Birnbaum recalled working nights on Mondays and Tuesdays, all day on Saturdays and even some Sundays to complete the job. But Gregg Birnbaum said his father later sought to guard his private time against the demands that accompanied his success on Wall Street.

“When my dad became president of the N.Y.S.E. in 1985, they wanted to give him a beeper,” he said. “My father said: ‘Absolutely not. Why would I want you to reach me at off hours?'”

Mr. Birnbaum brought his deep knowledge of the markets’ inner workings and his strong relationships with other exchange leaders to bear on that October day in 1987 when things got out of control.

“It was chaos,” Mr. Brodsky said. “A lot of what happened at the time, the question was: Why did the crash occur? Who was to blame? A lot of people pointed at Chicago and said, ‘It’s their fault, it was the futures on the S&P that dragged the market down.'”

As executives in New York and Chicago traded accusations, Mr. Birnbaum picked up the phone and called Mr. Brodsky, then the head of the Chicago Mercantile Exchange.

“Because of my relationship with Bob, we were able to work out, instead of all the hostility and the name-calling, we were able to work out things that made the markets better,” Mr. Brodsky said.

A few months after the crash, Mr. Birnbaum convened a meeting between the exchange leaders, including Mr. Brodsky and the New York Stock Exchange’s chief executive, John J. Phelan Jr., at the Four Seasons restaurant in Manhattan.

“We had to take the edge off,” Mr. Brodsky said. “It was a very calm business lunch. Bob was able to calm the emotions. And he was able to solve the problem.”

The executives worked out an agreement that would see all U.S. stock and equities options markets halt if price drops in the benchmark Standard & Poor’s 500 Index reached certain thresholds, with pauses lasting for between 15 minutes and the rest of the trading day, depending on when in the day trading was halted and the size of the drop.

The marketwide circuit breakers were activated in 1997 and again on March 9, 2020, when stocks fell 7 percent just after trading began, amid fears that the coronavirus spreading around the world would severely damage the global economy. Fear over the virus tripped them three more times that month.

Mr. Birnbaum was retired by then and living in Boca Raton with his second wife, Gloria J. Birnbaum, who survives him. His first wife, Joy (Mumford) Birnbaum, died in 1990.

In addition to his son, Mr. Birnbaum is survived by a daughter, Julie Duffy; three stepchildren, Jeremy Dickens, Simon Dickens and Jenny Patinkin; and seven grandchildren. A brother, Stanley, died before him.

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