Pronouncing NSE guilty of abusing dominant market position, the Competition Commission has asked the bourse to pay a penalty of Rs. 55.5 crore within 30 days and also immediately stop subsidising its services.
In its order, passed last evening and dispatched on Friday, the competition watchdog said that there was “a clear intention on the part of NSE to eliminate competitors in the relevant market.”
Accordingly, the CCI has imposed a penalty of Rs. 55.5 crore, which is 5 per cent of the bourse’s three-year average turnover, the order said.
In addition, NSE has been directed to “cease and desist from unfair pricing, exclusionary conduct and unfairly using its dominant position in other markets to protect the relevant CD (currency derivative) market with immediate effect.”
In its 170-page order, CCI also asked NSE to maintain separate accounts for each segment with effect from April 1, 2012, and modify its zero price policy in the CD market and levy appropriate transaction costs within 60 days.
The exchange has also been asked to provide its brokers free choice to select the trading software systems for the CD segment, under the overall supervision of market regulator SEBI.
The CCI order follows a complaint filed by its rival MCX-SX, which had accused NSE of abusing its dominant market position to corner business in CD segment.
No immediate comments were available from NSE officials, but the exchange would now have an option to approach the Competition Appelate Tribunal (COMPAT) or a High Court against the order.
MCX Stock Exchange MD & CEO Joseph Massey welcomed the order and said that it would “safeguard new entrants and ensure innovators are not decimated by existing entities which have deep pockets and more powerful.”
Massey said that MCX-SX would now claim compensation for the losses and damages it has incurred due to predatory pricing by NSE.
The final order from CCI follows a majority order passed by the Commission on May 25, along with which it had also issued a notice to the bourse before quantifying the penalty.
Last month’s order was passed with a majority vote of five members of the seven-member commission.
Two members -- Anurag Goel and Geeta Gouri -- had dissented with the majority order, where NSE was found guilty of abusing its market dominance and following unfair trade practices in the currency derivatives market.
The maximum penalty prescribed for such an offence is 10 per cent of the average turnover, but the CCI decided on a penalty of only 5 per cent of penalty.
However, a majority order is considered enforceable under the regulations.
NSE entered currency derivatives in August 2008, followed by MCX-SX in October 2008 and later by USE 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 report found NSE 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 approached 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 by June 3 its complete order, including views of members dissenting with the majority ruling.
