CCI Holds NSE Guilty of Unfair Trading in Currency Derivatives
Anti-monopoly watchdog Competition Commission of India (CCI) on Wednesday held National Stock Exchange (NSE) guilty of abusing its dominant position in response to a representation filed by rival exchange MCX Stock Exchange Ltd (MCX-SX).
The order has been issued for violation of section 4 of Competition Act 2002.
MCX-SX had alleged that NSE had acted in contravention of competition laws and engaged in unfair trading in currency derivatives markets.
On May 5, the Commission had issued a showcause 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 CCI sent the notice to NSE before deciding on the quantum of fine to be slapped on it.
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, CCI had ordered a probe into alleged misuse of 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 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.
The Commission is yet to decide on the quantum of fine to be levied on the NSE. NSE has been given a week to respond and clarify its position on the charges made by MCX-SX.
Currency futures trading started on NSE on August 29, 2008, and at the MCX-SX on October 7, 2008. During the full year ended March 31, 2011, 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 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.