This story is from June 24, 2011

NSE found guilty of unfair trade practice

TNN / Updated: Jun 24, 2011, 01:31 IST

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Competition Watchdog Seeks Rs 55Cr Penalty On Currency Futures Business

NSE found guilty of unfair trade practice

NEW DELHI: In its biggest verdict so far, the Competition Commission of India (CCI) has held the National Stock Exchange guilty of indulging in unfair market practices, which were detrimental to competition.
The country’s largest stock exchange faces a penalty of Rs 55.5 crore – which is 5% of its average turnover during the last three years. Additionally, NSE may also have to pay damages to MCX Stock Exchange, its rival in the currency futures business which had gone to CCI, if the Jignesh Shah-promoted entity makes a claim.
When contacted, a spokesperson of NSE said the exchange was yet to receive the order, while executives were surprised as the news got leaked to the media even before NSE got a copy of the CCI order.NSE is expected to challenge the CCI order in either the Competition Appellate Tribunal or the High Court over the next few days.
Prior to this, the Competition Commission had only levied a penalty in one case, which was a token penalty of Rs 1 lakh in a dispute between multiplex owners and film producers. This time too, it has chosen not to levy the maximum permissible penalty to 10% of the average turnover for the preceding three years.

The competition watchdog has also suggested behaviour remedies measures and asked NSE to "cease and desist" from unfair trade practices in the currency derivative trading. According to the order, NSE has to stop subsidising its currency derivatives operations which MCX-SX had alleged was being done by way of fee waiver.
In May CCI had issued a penalty notice and it turned out that it was a split verdict with two of the five members submitting a dissent note. NSE entered currency derivatives in August 2008, followed by MCX-SX in October 2008 and later by USE (

United Stock Exchange) 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 moved 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 its complete order by June 3, including views of members dissenting with the majority ruling.

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