The COMPAT upheld an order passed by CCI, which had found NSE guilty of abusing its dominant market position in currency derivatives segment
The Competition Appellate Tribunal (COMPAT) on Tuesday upheld the directives passed by Competition Commission of India (CCI) against National Stock Exchange (NSE).
In June 2011, the CCI had imposed a penalty of Rs55.5 crore on NSE for 'abusing its dominant position in the currency derivative market by cross subsidising this segment of business from other segments where it enjoyed virtual monopoly'. MCX Stock Exchange (MCX-SX), in 2009 had filed a complaint alleging that NSE was indulging in unfair practices by waiving the transaction fee on currency derivatives.
Reacting on the COMPAT order, NSE said it would appeal against the decision. “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 capital markets. A suitable review of the implications will be done in due course," the Exchange said in a statement.
In its order dated 23 June 2011, the CCI had imposed a Rs55.5 crore fine on NSE for abusing its dominant market position and asked the bourse to stop unfair trade practices like subsidising its services with a zero-price regime in the currency derivatives segment.
Imposing a penalty equivalent to 5% of the bourse's three-year average turnover, the CCI had said there was "a clear intention on the part of NSE to eliminate competitors in the relevant market".
The CCI order followed a months-long probe into the matter after a complaint from the NSE's younger rival, MCX-SX.
NSE, then challenged the CCI order before the COMPAT . During its first hearing in August 2011, the COMPAT granted a conditional stay on the Rs55.5 crore penalty order but asked the bourse to comply with the other directions of the fair-trade watchdog in this matter. The Tribunal also directed NSE to give an undertaking that it would have to pay the full penalty, along with interest at the rate of 9% per annum, if it loses the case.
The NSE and MCX-Stock Exchange (MCX-SX) had entered into currency derivatives trading in August 2008 and October 2008 respectively, followed by United Stock Exchange (USE) in 2010.
However, in November 2009, MCX-SX filed a complaint against NSE for abusing its dominant position and thus violating the Competition Act.
After a year-long probe, CCI found NSE guilty of anti-competition practices and penalised it for abusing its dominant market position.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
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The CBDT has wisely decided to curb frivilous appeals by the tax dept. that they invariably end up losing.