MSEI to submit report to Compat on ₹856 crore claim against NSE

Dispute relates to NSE’s alleged abuse of dominance in currency derivatives

May 22, 2017 10:57 pm | Updated 10:57 pm IST - MUMBAI

The nine-year old tussle between the Metropolitan Stock Exchange of India (MSEI) and the National Stock Exchange (NSE) at the Competition Appellate Tribunal (Compat) will gather pace soon with the MSEI set to submit an independent report in support of its claim seeking ₹856 crore as compensation from NSE.

The matter relates to MSEI’s complaint against the NSE alleging abuse of its dominant position and predatory pricing in the currency derivatives segment.

“We are in the process of submitting the independent report,” MSEI managing director and CEO Udai Kumar told The Hindu . “It should be done next month.”

“The appeal filed by NSE against the levy of penalty of ₹55.5 crore is scheduled to be heard in the Supreme Court in July,” Mr. Kumar said, adding MSEI planned to file the reportbefore that.

MSEI, earlier known as MCX Stock Exchange (MCX-SX), is required by law to file an independent report by a chartered accountant validating the claims and the calculations based on which it had sought compensation. Incidentally, MSEI filed its compensation application in February 2015.

The dispute dates back to October 2008 when MCX-SX started offering trading in currency futures. Its larger counterpart, NSE, was already offering currency futures trading and was not levying any charges in the segment. This forced MCX-SX to offer currency futures trading for free.

CCI complaint

In 2009, MSEI filed a complaint against NSE at the Competition Commission of India (CCI) alleging that the zero-pricing strategy was an abuse of market dominance. NSE, it claimed, was cross-subsidising losses in the currency segment from profits in other segments like equity and equity derivatives.

In June 2011, CCI ruled in favour of MSEI and levied a penalty of ₹55.5 crore on the NSE which challenged the ruling at Compat and then at the Supreme Court, which granted an interim stay on the penalty. Meanwhile, NSE started levying charges in the currency segment from August 2011.

The process at Compat involves the compensation application being backed by an independent evaluation by a chartered accountant. Thereafter, the appellate appoints a panel of experts who again have to validate the claim and the assumptions based on which the amount has been arrived at.

Incidentally, the penalty amount of ₹55.5 crore (if MSEI wins the case at SC) goes to the Consolidation Fund of India. Hence, aggrieved parties have to separately file a compensation application to claim an amount in lieu of the alleged damages.

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