Tribunal upholds 'anti-competitive' verdict against NSE

Says currency market practices were an abuse of dominant position in the exchange space

The Competition Appellate Tribunal (CAT) has upheld a 2011 order against the National Stock Exchange (NSE), which found the latter acting with an intention of eliminating competition in the currency segment.

“We do not see any merits in the appeal and dismiss the same,” said the order by Chairman V S Sirpurkar and member Rahul Sarin, according to the tribunal’s website.

The MCX Stock Exchange (MCX-SX) had lodged a complaint in 2009 with the Competition Commission of India (CCI), that NSE was using its dominance in other exchange segments to subsidise the currency segment. MCX-SX had alleged it was suffering losses on account of the fact that it was present only in the currency segment, where it was being forced to offer the same subsidised services as NSE.
 

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• Competition commission had passed an order in 2011 saying NSE practices in currency segment were anti-competitive
• NSE had been accused of subsidising its currency segment through profits from other divisions, such as equities
• MCX-SX had said it suffered losses on account of the same
• Use of FTIL software also said to have been hit through access issues
• Tribunal has upheld the order
• NSE can now appeal in the Supreme Court

It had also alleged that Financial Technologies India Ltd (FTIL), which had promoted it and was a provider of exchange software, was being discriminated against by NSE.

CCI passed an order in 2011 imposing a penalty of Rs 55.5 crore for abusing its position in the currency segment. The order had been passed, with a four-two majority with two members of the Commission dissenting with the majority decision. They were Geeta Gouri and Anurag Goel.

NSE had appealed against the same in the Competition Appellate Tribunal.

“We welcome the order passed by Compat upholding the CCI order. We believe that healthy competition is always in the interest of overall development of Indian financial markets. The Compat order reaffirms the position that dominant undertakings have a special responsibility not to distort competition in the sectors where they operate through their actions,” said Saurabh Sarkar, managing director and chief executive officer at MCX-SX.

NSE  said it was reviewing the order.

“NSE will appeal the order of Compat and we will do the needful after going through the detailed order. Whatever we have done was in the interest of the development of the capital markets. A suitable review of the implications will be done in due course,” said a spokesperson, in an emailed statement.

Another issue related to anti-competitive practices by DotEx, an NSE subsidiary, which is said to have affected use of software developed by FTIL, was not dealt with in the order as it had been settled between the two, according to the order.

An exchange source said MCX-SX might look to take the NSE to court for further damages. An
NSE spokesperson declined to comment on this.