John S. Reed (search), the former Citigroup executive selected on Sunday as interim head of the New York Stock Exchange (search), will be faced with calming the turmoil at the Big Board amid outsiders' calls for reform.

Reed, former co-chief executive of Citigroup Inc. (C), will return from an overseas vacation next week, with those issues and a looming investigation by the Securities and Exchange Commission (search) at the top of his agenda.

Quickly naming an interim chairman and CEO was considered an important first step in finding a permanent replacement for Richard Grasso (search), who quit last week amid furor over his $140 million payout.

Now, the NYSE must deal with questions raised by Grasso's financial bonanza, specifically the future of the exchange's dual role as a regulator and a securities market owned by an exclusive group of 1,366 members, or seat owners.

Also, the exchange is being investigated by the SEC over the trading practices of several of its specialist trading firms, which match buy and sell orders and make a market in specific stocks.

The SEC has been monitoring an NYSE inquiry into suspected trading violations by floor specialists, including possibly failing to stand aside in adequately liquid markets and possibly "trading ahead" of customer orders, sources close to the commission told Reuters.

Indeed, specialists are being called in for private talks with SEC staff, marking a step forward in the SEC's review of whether the NYSE is "fulfilling its responsibilities to investigate specialists," a source familiar with the matter told Reuters.

"They need to really just do a complete overhaul of what they're doing," said John Whitney, professor emeritus at Columbia Business School and a board member of consumer goods company Church & Dwight Co. Inc. "In my view, they have to bite the bullet and separate the regulatory (arm) from the business. I don't think they can play that charade any longer."

On Sunday, following the news conference where Reed was introduced as the exchange's interim head, H. Carl McCall (search), lead director of the NYSE board, said the board's report on its own governance to the SEC would be pushed back from its original date of Oct. 2 because Reed will not be in New York for another week. The report has been in the works since March.

In early June, the NYSE had released interim recommendations of the Special Committee on Governance, marking sharp changes from tradition. Under the recommendations, which have been adopted but not yet officially implemented, the exchange will report the salaries of top management and keep the top executives from serving on the boards of listed companies.

The other contentious issue, whether the NYSE should replace its open outcry trading system with a more automated system, is also likely to be revisited now that Grasso — an aggressive proponent of open outcry — is gone.

"The technology is clearly there for the exchange to be more transparent in its dealings, but the prior regime resisted any technology advances that made the process more efficient," said John Wheeler, manager of equity trading at fund company American Century Investment Management.

Dealing with complicated issues and conflicting personalities will not be new for Reed.

"At Citigroup, that is what he attempted to do," said Richard Bove, banking analyst at Hoefer & Arnett. "He attempted to put things in perspective and develop long-term operating plans."

Reed, 64, retired from Citigroup in April 2000 as co-chairman, after a power struggle left Sandy Weill (search) and former U.S. Treasury Secretary Robert Rubin (search) firmly in control of the world's largest financial services company.

Reed's appointment came as a surprise because of his relative outsider status at the NYSE, even though he had spent his entire career at a major New York bank.

"He has never really been a Wall Street insider, and that can be an advantage," said Mike Rosinus, general partner at Tiedemann Investment Group, which manages about $1.1 billion.

"He is probably the most removed from the entrenched Wall Street, relative to people who come from Wall Street," said Rosinus, who manages the firm's financial-stock hedge fund.

Reed said on Sunday that he had only been to the NYSE's downtown Manhattan headquarters once and had never met Grasso, although he anticipated speaking to him soon. Reed said he would be paid $1 for his new job.

However, Bove said he thought Reed would have few reservations about doing whatever is necessary to revamp the exchange.

"Reed is very adept at handling infighting, perhaps more so than many CEOs," he said. "When he took over in 1986, every person in top management at Citicorp was fired except for one. Over the next four to five years, he eliminated the whole top management ... and put in all his own people."

One of the demands following the Grasso debacle is more transparency into the NYSE's inner workings — especially concerning the salaries of its top people.

"I think they're going to have to disclose everything that I have to disclose. I'm head of the governance committee of an NYSE company and a lead director, and so I want them to do the same damn things that I have to," Whitney said.