April 4 (Bloomberg) -- Rohit D'Souza, who has led Merrill Lynch & Co.'s stock-trading division since 2004, resigned following a rift with Chief Executive Officer John Thain, a person familiar with the decision said.

D'Souza, 43, left because Thain planned to install another senior trading executive over him, said the person, who declined to be identified because the departure hasn't been announced. Merrill Lynch spokeswoman Jessica Oppenheim declined to comment and D'Souza didn't return calls seeking comment.

More than a dozen senior managers and traders have left New York-based Merrill since Thain took over the third-biggest U.S. securities firm by market value in December. The exodus has spread beyond executives in Merrill's debt-trading division -- tarred by more than $20 billion of writedowns on mortgage bonds and loans -- to the stock department, which was Merrill's best performing last year.

``D'Souza is a talented person, and it's a loss to Merrill,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. who rates Merrill shares ``market perform.''

Thain has promised to overhaul management following the ouster of former CEO Stan O'Neal and last year's record net loss of $7.8 billion. So far his hires have been limited to administrative, public-relations and finance personnel, such as Chief Financial Officer Nelson Chai, whom Thain recruited from his prior employer, NYSE Euronext, owner of the New York Stock Exchange.

Keeping Focused

The firm has made no announcements regarding another former colleague, Thomas Montag, whom Thain said earlier this year he was trying to recruit. Montag stepped down late last year as the head of sales and trading in the Americas for Goldman Sachs Group Inc., where Thain worked for more than 20 years before joining the NYSE in 2004. Oppenheim, the Merrill spokeswoman, declined to comment on Montag.

``Thain has the right to choose his own people, but anytime you have turnover in a senior group, people take their eyes off the ball,'' Hintz said. ``This is not the time for Merrill people to take their eyes off the ball.''

Under D'Souza, stock trading was Merrill's best performing major business in 2007, helping to mitigate about $25 billion of writedowns taken on mortgage-related bonds, corporate loans and assets held in other Merrill divisions.

Revenue Gains

Revenue at the stock-trading business, known internally as Equity Markets, gained 23 percent to a record $8.29 billion last year. That compares with a 22 percent gain to $4.92 billion for investment-banking, which includes fees from advising on corporate mergers and underwriting bond and stock sales. Merrill's biggest division, its network of 16,700 brokers, had 2007 revenue of $12.9 billion, up 14 percent.

The writedowns were mostly in the fixed-income division, and Merrill last October fired that unit's head, Osman Semerci. O'Neal resigned later in the month.

The person who hired D'Souza, Dow Kim, left in May 2007 to start his own hedge fund.

In 2004, Kim, who oversaw all of Merrill's trading businesses, recruited D'Souza from rival securities firm Morgan Stanley to head stock trading worldwide. At the time, Kim said he wanted to modernize Merrill's stock business, with automated trading systems that could route orders more cheaply than phone- based salepeople.

Forming Alliances

D'Souza, who has a computer science degree from the 550- student Bethany College in Lindsborg, Kansas, did just that. He's described by those who know him as cordial and straightforward -- and more likely to chit-chat about computers and technology than sports or expensive cars.

He started his career at Barra Inc., a Berkeley, California- based provider of investment risk-management systems, according to a Merrill biography. He then went to New York-based Investment Technology Group Inc., an electronic brokerage, according to securities-industry records.

In 1996 he joined Morgan Stanley, where he worked for eight years and was a mentee of Vikram Pandit, now CEO of Citigroup Inc.

At Merrill, D'Souza overhauled computerized systems used to place trading orders, while setting up alliances with rival brokerage firms to develop electronic markets that could compete with Thain's New York Stock Exchange.

One venture, BlockAlert, was started in 2006 with ITG to help hedge funds and other institutional traders buy and sell large blocks of stocks -- usually 10,000 shares or more. Also that year, the firm bought the electronic brokerage Wave Securities LLC and joined with other brokerage firms to start a trading platform called BIDS Trading LP.

Top Ranking

D'Souza overhauled the management of Merrill's equities department. Former colleagues Sudeep Gupta, Jeff Penney, Sylvan Chackman and Adam Langsam joined from Morgan Stanley and he recruited Aamir Sheikh from Barra.

D'Souza has maintained Merrill's ranking as the biggest broker of NYSE-listed stocks, according to data from Thomson Corp.'s Autex.

Merrill gained 36 cents to $46.25 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has declined 14 percent this year.

Merrill 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 4, 2008 18:08 EDT