April 28 (Bloomberg) -- Merrill Lynch & Co. Chief Executive Officer John Thain, assembling his own management team after the departure of more than 20 executives, hired former Goldman Sachs Group Inc. colleague Thomas Montag to head trading worldwide.

Montag, 51, who stepped down last year as Goldman's trading head in the Americas, will report directly to Thain, New York- based Merrill said today in a statement. He starts Aug. 4, company spokeswoman Jessica Oppenheim said.

Merrill's management ranks have thinned since Thain, 52, took over as CEO on Dec. 1, as executives promoted under former CEO Stan O'Neal stepped down or were forced out. Thain is replacing them with former associates from Goldman, where he worked for 25 years and which surpassed Merrill and rival Morgan Stanley this decade to become the most profitable U.S. securities firm.

``Montag's willingness to go to Merrill and really try and fix things there on the trading side is a vote of confidence,'' said Jeff Harte, an analyst at Sandler O'Neill & Partners in Chicago. ``This is a guy who's very respected and comes from Goldman, which at least for now is still looking like the best managed investment bank out there.''

Merrill rose 16 cents to $49.80 at 4:08 p.m. in New York Stock Exchange composite trading. The shares are down 45 percent in the past year.

Top Priority

Montag, who worked at New York-based Goldman for 22 years, takes over Merrill's trading business after more than $30 billion of writedowns on subprime mortgages and bonds saddled the 94-year-old firm with record losses and led to O'Neal's ouster.

Montag is Thain's biggest hire since he arrived at Merrill. His other recruits include a new chief financial officer, chief of staff and heads of communications and government relations. Two weeks ago, Thain said that ``filling out the senior management team'' was his top strategic priority in the U.S.

He overlapped with Montag at Goldman until 2004, when Thain left to become CEO of the New York Stock Exchange. He confirmed as far back as January that he was trying to recruit Montag, and in today's statement called him a ``proven leader with extensive industry knowledge and experience.''

``Tom will help drive the firm's strategy in key markets around the world,'' Thain said.

Montag received a bachelor's degree from Palo Alto, California-based Stanford University in 1979 and a master's in business administration from Chicago's Northwestern University in 1982. He joined Goldman in 1985, became a partner in 1994 and was named a managing director two years later.

Derivatives Chief

In 1999 he moved to Tokyo, where he oversaw Goldman's fixed-income, currency and commodities trading in Asia. He was co-president of the firm's Japanese operations, where profit tripled over two years to 37.3 billion yen in 2006 ($317 million at the time).

Montag also headed Goldman's derivatives business worldwide, according to Merrill's statement, and in 2001 was elected vice chairman of the International Swaps and Derivatives Association. Derivatives, or financial instruments whose value is linked to the price of an underlying security or benchmark, have been one of Wall Street's fastest-growing businesses, with so-called credit-default swaps expanding to $62.2 trillion outstanding last year from $34.5 trillion in 2006.

``He's got a nice mix of backgrounds, from having had the Asian exposure, to the derivatives experience and also having performed well enough to rise to where he did at Goldman,'' Sandler O'Neill's Harte said. ``To come in from the outside, you've got to carry a certain amount of industry respect to be listened to by the people working on these trading floors.''

Cohn, Winkelreid

Montag was passed over in Goldman's corporate succession in 2006, when the firm tapped younger peers Gary Cohn and Jon Winkelried to become co-presidents under CEO Lloyd Blankfein. Thain outranked Blankfein at Goldman before he left for the NYSE.

Terms of Montag's contract with Merrill weren't disclosed. While at Goldman, he ranked among Japan's top 100 taxpayers from 2002 through 2004. His 2004 bill of 418 million yen ($3.9 million) implied total pay of 1.3 billion yen, based on the standard 37 percent tax rate for earners above 18 million yen.

The New York Observer reported Feb. 26 that he agreed to buy a six-story townhouse on New York's Upper East Side that was listed at $38 million. Montag didn't return a call for comment at his home in New Jersey.

Fleming, Fakahany

Merrill hasn't had a global head of sales and trading since Dow Kim stepped down in May 2007 as co-president of global markets and investment-banking. The firm's two trading divisions -- fixed-income and stocks -- had combined revenue of $14.3 billion in 2006, or 42 percent of Merrill's total. That was before last year's writedowns in the fixed-income division overwhelmed profits from stock-trading and resulted in negative overall trading revenue of $7.59 billion.

When Kim left, O'Neal did away with his post, promoted Greg Fleming and Ahmass Fakahany to newly created positions as co- presidents of Merrill Lynch and made the heads of the two trading divisions report to the co-presidents. Fakahany quit in February, leaving Fleming as the sole president.

Following Montag's arrival, Fleming will remain president with oversight for mergers advice and debt and equity underwriting as well as Merrill's retail brokerage, the biggest of its kind in the U.S. with more than 16,000 financial advisers. Fleming also oversees Merrill's private-equity unit.

Montag may have the freedom to assemble his own team of managers in the trading department. On April 7, Merrill announced the pending departure of Rohit D'Souza, who has led the stock-trading division since 2004. David Sobotka, the head of fixed-income, commodities and currencies, also has told colleagues he's leaving, people familiar with the matter said last week.

Merrill, the third-biggest U.S. securities firm, is a passive, 20 percent investor in Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: April 28, 2008 18:55 EDT