In the long-running tussle between the National Stock Exchange (NSE) and its younger rival MCX-SX, the Competition Commission is believed to have penalised NSE for abusing its dominant market position. As a penalty, NSE has been asked to pay 5% of its average annual turnover and also “cease and desist” of unfair trade practices in the currency derivative trading, sources said.
According to the order, NSE has to stop subsidising its currency derivatives operations and refrain from pursuing any anti-competitive practices.
While sources said that CCI passed the order this evening, an NSE official said they have not got any order as yet.
Along with the majority the CCI order on May 25, the commission had issued a notice to the bourse before quantifying the penalty. Last month’s order was passed with a majority vote of five members of the seven-member commission.
Two members — Anurag Goel and Geeta Gouri — had dissented with the majority order, where NSE was found guilty of abusing its market dominance and following unfair trade practices in the currency derivatives market.
However, CCI had already made its stand clear that the dissent note of the two members, which has been issued as per a court direction pursuant to a petition filed by NSE, would not affect its ruling, as a majority order is considered enforceable under the regulations.
NSE entered currency derivatives in August 2008, followed by MCX-SX in October 2008 and later by USE in September 2010.
The CCI order came after a year-long probe by CCI, which began after MCX-SX filed a complaint on November 16, 2009. The CCI sought a detailed probe into the matter by its Director General, which submitted its report in September 2010.
After the DG’s report found NSE to be guilty of anti- competition practices, the CCI conducted its further inquiry with various parties and issued a show-cause notice to NSE on April 29 this year and later its majority order on May 25.
The matter had also reached Delhi High Court after the NSE approached the court with a plea that it could reply to the notice only after reviewing the complete order.
The court, on May 31, asked CCI to provide NSE by June 3 its complete order, including views of members dissenting with the majority ruling.
NSE have an option to challenge CCI’s order at the Competition Appellate Tribunal. As per the court direction, NSE would now have to reply
by June 10 to the CCI’s penalty notice, after which the competition watchdog will decide on the penal actions to be taken against the bourse.
During the court hearing on NSE’s petition, the MCX-SX counsel had alleged that attempts are being made to complicate the matter as the current CCI chairman was retiring on the coming June 3.
Incidentally, the name of Anurag Goel was doing the rounds as one of the candidates to succeed Dhanendra Kumar as CCI Chairman.
“They are complicating the situation by delaying. Chairman is retiring and then they will plead ‘forum non-judice’ (re-decide the issue from beginning) ” MCX-SX counsel had said on NSE’s petition seeking dissent notes before replying to the CCI notice.
Pronouncing NSE guilty of abusing dominant market position, the Competition Commission has asked the bourse to pay a penalty of Rs 55.5 crore within 30 days and also immediately stop subsidising its services.
In its order, passed last evening and dispatched on Friday, the competition watchdog said that there was “a clear intention on the part of NSE to eliminate competitors in the relevant market.”
Accordingly, the CCI has imposed a penalty of Rs 55.5 crore, which is 5% of the bourse’s three-year average turnover, the order said.
In addition, NSE has been directed to “cease and desist from unfair pricing, exclusionary conduct and unfairly using its dominant position in other markets to protect the relevant CD (currency derivative) market with immediate effect.”
In its 170-page order, CCI also asked NSE to maintain separate accounts for each segment with effect from April 1, 2012, and modify its zero price policy in the CD market and levy appropriate transaction costs within 60 days.
The exchange has also been asked to provide its brokers free choice to select the trading software systems for the CD segment, under the overall supervision of market regulator Sebi.
The CCI order follows a complaint filed by its rival MCX-SX, which had accused NSE of abusing its dominant market position to corner business in CD segment.