Merrill Lynch last night appointed John Thain, the head of NYSE Euronext, as its chairman and chief executive.

His appointment, effective on December 1, follows the recent departure of Stan O’Neal after Merrill was forced to admit that it had racked up vast credit crunch-related losses.

Mr Thain, who had also been viewed as a leading contender for the top job at Citigroup, spent more than 20 years at Goldman Sachs, working on its mortgage bond trading desk before becoming president of the group after stints as head of operations, technology and finance, and chief financial officer.

He moved from Goldman to his NYSE role in January 2004 and is credited with transforming the Big Board from a domestic, nonprofit membership organisation into a global bourse. The 52-year-old also master-minded the group’s push into automated trading. Last year, he merged NYSE Group with Euronext to build the first transatlantic exchange operator.

Last night NYSE Euronext named Duncan Niederauer, its president and co-chief operating officer, to replace Mr Thain.

Mr Thain’s appointment came two weeks after Mr O’Neal resigned, as Merrill sought to draw a line under its recent woes and set about repairing its reputation. The US investment bank announced the largest quarterly loss in its 93-year history – of $2.2 billion (£1.1 billion) for the third quarter – after a much larger than expected $8.4 billion writedown, much of it relating to sub-prime mortgages. The group is expected to take up to $10 billion in further such losses this quarter.

Despite Mr Thain’s qualifications for the job, his appointment was greeted with surprise because most analysts had expected Merrill to promote Larry Fink, the chief executive of BlackRock, the fund manager, in which the bank owns a 49 per cent stake. A Merrill spokesman said that Mr Fink had not been offered the job.

Merrill’s writedown stems from Mr O’Neal’s insistence on changing the bank’s risk-averse culture. He plunged into collateralised debt obligations (CDOs) – pools of bonds, with high exposure to sub-prime mortgages – which lost much of their value as the US housing market deteriorated.

Mr Thain will need to reassure investors and staff that Merrill’s remaining CDO portfolio will be handled as well as possible and that such risky investments are in the past.

He will also need to assess Merrill’s risk management procedures, which clearly failed in evaluating the bank’s exposure. Last night shares in Merrill Lynch closed 93 cents higher, or 1.63 per cent, at $57.88.

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