The MCX Stock Exchange (MCX-SX) plans to recover R150 crore as compensation from the National Stock Exchange (NSE) for what it claims are losses and damages incurred due to abuse of market position by the latter in the currency derivatives market. On Thursday, the Competition Commission of India (CCI) had held India?s largest bourse guilty of these charges.
CCI has directed NSE to pay a penalty of R 55.5 crore or 5% of its average turnover in three years of R1,110 crore. The money needs to be paid within 30 days. NSE has been also asked to stop subsidising its currency derivatives operations and refrain from pursuing any anti-competitive practices. Additionally, NSE is also required to put in place a system that would allow its members to choose between NOW, ODIN or any other market watch software.
Responding to the CCI order, NSE said: ?We are reviewing the 4:2 majority CCI order and will consider our future course of action after obtaining the opinion of our legal advisors.? NSE has the option to challenge the CCI order before the Competition Appellate Tribunal.
Additionally, MCX-SX also plans to claim legal costs and other damages incurred during the last three years when NSE allegedly abused its dominance in the currency derivatives market. ?We will claim compensation for the losses and damages incurred due to predatory pricing,? said Joseph Massey, MD&CEO.
In November 2009, MCX-SX had approached CCI alleging predatory pricing by NSE. This is the highest penalty slapped by CCI on an entity ever since the competition regulation came in to force with the previous one being a small fine of R1 lakh in a dispute between multiplex owners and film distributors.
On April 29, CCI had slapped a notice on NSE asking it why a penalty should not be levied. In response, NSE moved the Delhi High Court on May 16, with a plea that it could reply to the CCI notice only after reviewing the complete order. The court, on May 31, asked CCI to provide NSE by June 3 its complete order, including views of members dissenting with the majority ruling. Two members ? Anurag Goel and Geeta Gouri ? had dissented with the majority order on the grounds that initially charging a low price to facilitate minimum liquidity before shifting to a higher price later is part of a legitimate business model.
The dissent note had said: ?It is not aware of any case in the history of competition jurisprudence globally, where a firm?s market share has been reduced drastically (to less than a third in this case) in a relatively short period (two years) and yet has been found dominant by a competition regulator or court.?