Competition watchdog CCI on Wednesday pronounced the National Stock Exchange (NSE) guilty of abusing its dominant market position by adopting unfair trade practices in connection with currency derivatives trading.
However, the quantum of fine to be levied on NSE is yet to be ascertained.
“The commission has pronounced NSE guilty of violating Section 4 of the Competition Act, 2002. But it will decide on the quantum of fine only after hearing NSE. We have given them a week's time to respond to our show cause notice,” an official said.
This is the second time CCI has sent a show cause notice to NSE on the issue before taking a decision on the quantum of fine to be slapped on it. The earlier show cause notice was challenged in the Bombay High Court.
Under the law, companies can be fined up to 10 per cent of their three-year average profit.
MCX-SX, in its representation to 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, CCI had ordered a probe into the alleged misuse of its dominant position by NSE.
Last year in December, the investigation wing of CCI had recommended action against NSE for abusing its dominant position in the currency derivatives trade segment. The report said 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 derivatives (CD) market.
Currency futures trading started on NSE on August 29, 2008, and on MCX-SX on October 7, 2008.
During the full year ended March 31, 2011, the total number of currency derivative contracts traded on MCX-SX was worth over Rs 90.31 crore, while for NSE the figure was nearly Rs 75 crore, as per data available with 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 2010-11.
