Bombay Stock Exchange Hires Bank of America's Kannan as Chief Executive

Bombay Bourse Hires Bank of America's Madhu Kannan

May 11 (Bloomberg) -- The Bombay Stock Exchange, Asia's oldest bourse, named Madhu Kannan as managing director and chief executive officer, filling a vacancy nine months after Rajnikant Patel quit.

The Bombay bourse, founded in 1875, has lost ground to its younger rival, the National Stock Exchange of India Ltd., which handles twice as many share trades and is the world's largest single stock futures market. The BSE's benchmark Sensitive Index has gained 21 percent this year after a record drop in 2008.

"They need to get their act together," said Mumbai-based Sanjay Sinha, chief executive officer of DBS Cholamandalam Asset Management Ltd. "The National Stock Exchange's reach and its ability to offer one platform, giving significantly larger scope in terms of products offered, is superior."

Kannan previously worked at Bank of America-Merrill Lynch as a managing director for global strategy. Prior to the stint at the investment bank, he was a senior vice president in the global corporate client group at NYSE Euronext, in charge of the Asian, Middle East and North African markets.

"The exchange has been the centre of Indian financial markets since 1875 and I look forward to ensure that BSE continues to build on its brand, history, and market position to create value for its stakeholders and the financial system," Kannan was cited saying in the BSE statement.

Currency Futures

The exchange in Mumbai, formerly known as Bombay, started offering currency futures in October, a month after the National exchange started the derivatives product.

Turnover on the Bombay Stock Exchange has fallen 41 percent in 2009 from a year earlier after the Sensitive Index slumped 52 percent last year, according to data compiled by Bloomberg. To attract investors, India's market regulator is considering extending trading hours for stocks and derivatives, the Securities & Exchange Board of India said in March.

India's two stock markets have formed alliances with overseas bourses to raise funds to invest in new trading systems and gain expertise in offshore trading.

The Bombay exchange sold a 51 percent stake to a group led by Deutsche Boerse AG and Singapore Exchange Ltd. in April 2007, after investors led by NYSE Group Inc. and Goldman Sachs Group Inc. acquired 20 percent of the National Stock Exchange.

The National Stock Exchange overtook Johannesburg's JSE Ltd. as the largest single stock futures market in the first quarter, with 50.2 million contracts compared with 27 million on the JSE, according to the World Federation of Exchanges.

Single stock futures are contracts that give investors the right to buy or sell a share at a fixed price on a future date. Brokerages provide loans to customers to buy stocks. If the value of a company's shares decline below a certain level, the broker will issue a so-called margin call, forcing the customer to repay part of the loan or provide collateral.

To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net .