Competition watchdog CCI has issued a show cause notice to the National Stock Exchange (NSE) asking why a penalty should not be imposed for its unfair trade practices in connection with currency derivatives trading.
"The commission has found NSE guilty of violating Section 4 of the Competition Act, which is abuse of dominant position," according to a source in the CCI.
The Competition Commission of India (CCI) has sent the show cause notice to NSE before deciding on the quantum of fine to be slapped on it.
"We have issued the show cause notice to NSE asking them why they should not be fined," the source said. Usually the CCI gives companies 15-20 days time to reply on notices.
When contacted the NSE spokesperson said, "We are unable to comment as the matter is subjudice."
Under the law, companies can be fined up to 10% of their three year average profit.
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The MCX-SX in its representation to the CCI in November 2009 had alleged that NSE had substantially reduced admission and trade related fees to eliminate competition and discourage other entities from entering the market. MCX-SX is promoted by commodity exchange MCX and Financial Technologies.
Based on this complaint, the CCI had ordered a probe into the alleged misuse of dominant position by the NSE.
Last year in December, the investigation wing of the CCI had recommended action against the NSE for abusing its dominant position in the currency derivatives trade segment.
The report said that NSE used its dominant position and original monopoly in equity, F&O (Future and Options) and WDM (Wholesale Debt Market) markets to protect its position in the currency derivative (CD) market.
Currency futures trading started on the NSE on AUgust 29, 2008, and at the MCX-SX on October 7, 2008.
During the full year ended March 31, 2011, the total number of currency derivative contracts traded on the MCX-SX was worth over 90.31 crore, while that of NSE it was nearly 75 crore, as per data available with the capital market regulator Sebi.
The total traded value of the currency derivative contract was about Rs 42 lakh crore on MCX-SX and Rs 34 lakh crore on NSE for FY11.