Richard Grasso began his career on the trading floor

Mr Grasso is seeking at least $50m from the NYSE, claiming breach of contract and defamation against the man who replaced him as chairman.

The NYSE is suing Mr Grasso to recover over $100m(�53m) in damages, arguing he misled directors about the pay package.

Mr Grasso spent 36 years at the NYSE before resigning in September.

Mr Grasso stepped down amid an uproar over a pay package, including savings, benefits and incentives, which totalled more than $180m(�96m).

We are confident that as the case progresses the attorney general's claims will prove to have no merit Eric Starkman Mr Grasso's spokesman

Mr Grasso, who insisted that he did nothing to influence his remuneration, claims that the NYSE breached the terms of his contract by making false statement about him in public.

He also accuses current NYSE chairman John Reed of defamation.

He claims that Mr Reed made disparaging comments in the media to put pressure on Mr Grasso to forego $48 million (�25 million) in additional compensation and to return part of the money already given him.

Eric Starkman, a spokesman for Mr Grasso, told the Associated Press: "This is one step in the process and we are confident that as the case progresses the attorney general's claims will prove to have no merit and that Mr Grasso is the only person entitled to any recovery in this matter."

Excessive pay

In a lawsuit handed down in May, the New York state Attorney General claimed that Mr Grasso's pay package was excessive under state law and that the former chairman had bullied fellow directors into approving it.

Mr Grasso was credited with raising the profile of the NYSE and of getting the exchange quickly back on its feet after the September 11 attacks.