NEW YORK - Shortly after the New York Stock Exchange announced a deal to transform itself last week, John A. Thain, the chief executive of the exchange, received an angry phone call from E. Stanley O'Neal, the chief executive of Merrill Lynch & Co. Inc.
O'Neal was upset that Thain, a former president of Goldman Sachs Group Inc. and a significant shareholder, should have allowed his former firm to advise both the exchange and the electronic trader it plans to acquire, Archipelago Holdings Inc.
In a brief, blunt exchange, O'Neal said Goldman's role in the deal was inappropriate, according to a person who was briefed on the conversation.
Even as the New York Stock Exchange is taking a bold step into electronic trading, the deal has set off a battle that lays bare the deep fault lines and competitive resentments that fuel today's Wall Street.
At stake is the future of the New York exchange, the world's largest stock market, and how stocks will be traded on it. The reputation of the 213-year-old exchange has been damaged by a long run of scandal involving the compensation of its former chairman, Richard A. Grasso, and the conduct of its specialist floor traders.
The characters in the fight represent some of the most powerful executives, with some of the boldest egos in finance.
Among them is Kenneth G. Langone, a brash, self-made billionaire and former director of the New York Stock Exchange and a vocal defender of Grasso. Langone wants to scuttle the deal cut by the stock exchange and is trying to organize a rival bid supported by rival Wall Street firms.
His campaign received a boost yesterday, when John J. Mack, a former president of Morgan Stanley and one-time chief executive of Credit Suisse First Boston, was named the point man for the group's effort.
For Mack, his new role as the "unpaid coordinator" for what is now very much a guerrilla campaign, is a surprising career turn.
Just months ago he discussed with Henry M. Paulson Jr., the chief executive of Goldman Sachs, the possibility of assuming a senior role in the investment bank, underscoring how tides on Wall Street can rapidly shift.
The group held its first meeting yesterday, with top executives from Lehman Brothers Holdings Inc., JPMorgan & Co. Inc. and Merrill Lynch attending. The executives expressed dissatisfaction with the deal and agreed that a richer price for the stock exchange could have been reached.
The stock exchange said yesterday that considerable work and due diligence was done on the transaction and the fact that two outside firms were hired to provide independent fairness opinions confers legitimacy on the deal.
The exchange even went so far to hire its own counsel to advise on the deal. The Big Board also defended the deal, saying it was in the best interests of the exchange.
Underlying the doubts about the exchange's merger with Archipelago is the notion that Goldman, in brokering the deal, magnified, unjustly, its influence as the most influential investment bank on Wall Street.
Goldman Sachs' 15 percent stake in Archipelago makes it the largest shareholder among Wall Street banks and that Thain, a former president of Goldman, approached his one-time employer to advise on the deal has raised questions from competitors of whether that deal was inappropriate.
In the cutthroat world of Wall Street deal making, the perception of being such an insider can result in extra deals and fees.
For Merrill Lynch, whose executives have always played a central role in the exchange's operations, the inside role that Goldman played - and was not disclosed to them - was especially galling.
A spokesman for Goldman Sachs defended the firm's role yesterday, claiming the firm was no more conflicted than its competitors and that most firms had a stake in either the exchange or Archipelago.
For Langone, too, it was the role that Goldman Sachs played, and the possibility that he, along with other exchange seat holders, may have lost out financially, that drove him to act.
But he did not jump immediately into the fray. Indeed, on the day that the deal was announced, he went out to dinner at Raos, the famous Italian eatery in East Harlem, where he and Grasso have shared many a meal.
A spokesman for Grasso said that he had no involvement with Langone's bid.
In the days after the exchange's announcement of its deal Wednesday, Langone, a frenetic man with a wide network of contacts, hit the phones, reaching out to Stanley F. Druckenmiller, a former top hedge fund executive for George Soros.
He also called Mack, another friend, whom he tried to persuade to become chief executive of an entity that may ultimately mount a rival bid for the exchange.
The meeting was held at the offices of Druckenmiller, who is partnering with Langone in his audacious bid. Langone has said that he expects to invest up to $100 million in cash in the deal. While most of Goldman's competitors were there, Morgan Stanley did not attend.
Still, it is by no means clear that the group will be able to cobble together a rival bid. Wall Street executives are a pragmatic lot, and will not invest their own capital in a venture that does not promise a return.