Mumbai: The Bombay Stock Exchange (BSE), under the aegis of its youngest-ever chief executive and a new top team, is looking to list and innovate to win back market share lost to upstart rivals.
“We want to transform this institution from what was essentially a single-product exchange to one which offers tradable products across all asset classes,” 36-year-old CEO Madhu Kannan, who took up the job earlier this year, said at the Reuters India Investment Summit in Mumbai on Tuesday.
The BSE, founded in 1875, has in recent years lost market share to its younger rival, the National Stock Exchange (NSE), which was founded in the early 1990s, and faces challenges from upstart exchanges.
The BSE has about 5,000 listed companies, more than any other bourse in the world, while the NSE has about 1,400. But the daily average turnover for the NSE in 2009 has been triple that of the BSE.
Not only did the BSE lose market share to the NSE, it also began offering currency futures after the NSE did and followed the NSE in forming overseas alliances.
Frankfurt-based Deutsche Boerse and Singapore Exchange each hold 5% stakes in the BSE.
“Any new products that are being launched, where the score is still 0-0, we want to be seen as very, very aggressive,” the avid cricket fan said, adding that technology, innovation and understanding the customer was his strategy for the future.
To jumpstart its technological innovation, the BSE bought Marketplace Technologies and will next week launch a data feed that is several times faster than its existing offering.
Currently, the bourse earns almost all its revenues on the trading side from the cash equity market, and Kannan is looking to reduce this reliance in coming years.
Kannan filled a post that had been vacant for nine months, and is now the youngest-ever CEO at Asia’s oldest stock exchange.
“(At the BSE) we were an ivory tower. The CEO was on the 26th floor and now we have moved to a nice, small, functional office ... which is closer to the team. Culturally that has made an impact,” said Kannan, who prefers staff to call him by his first name.
The old CEO’s office, with sweeping views of Mumbai, is now a conference room.
Of the BSE’s seven-member top executive team, only two are veterans of the pre-Kannan era at the exchange. Kannan’s recruits include James E. Shapiro from the New York Stock Exchange (NYSE) and Sayee Srinivasan from the Chicago Mercantile Exchange.
Kannan himself joined the BSE after stints at the NYSE and Merrill Lynch, where he worked closely with John Thain, who headed both.
The BSE has been mulling a listing for the past several years.
“We are in a preparatory stage for a listing,” Kannan said. “We are getting internally ready but the timeframe is something difficult to predict.”
As part of that planning, Kannan has begun releasing the BSE’s quarterly results, and had insisted that his employment contract and compensation structure be circulated to stakeholders after he joined.
“The exchange world has changed so dramatically and sometimes, you know, an institution like us, we are like a 134-year-old start-up. We’ve been there for a long time, the world has changed significantly.”