MCX-SX to approach CCI against rival BSE

Low transaction fees in BSE's currency derivative segment anti-competitive, alleges MCX-SX

MCX-SX plans to move regulator Competition Commission of India (CCI) against rival BSE Limited over the latter's low transaction fee in the currency derivative segment.

MCX-SX, which is facing a crisis over dwindling market share and the regulatory networth requirement, believes BSE's practice of charging low fees is an anti-competitive move.

At present, BSE, the newest entrant in the currency derivative segment, doesn't charge any transaction fees on currency trading, while plans to charge a measly fee of Rs 2 on turnover of every Rs 1 crore from December.

Meanwhile, the National Stock Exchange (NSE), the market leader in the currency segment, charges Rs 115 on turnover of Rs 1 crore and MCX-SX charges Rs 110.

"BSE is indulging in anti-competitive practices by offering low transaction charges for currency derivative. A lot of our market share and volumes have migrated to BSE in the past one year," said an exchange official.

As per a recent BSE circular, the exchange would start charging Rs 2 per crore of turnover for two months from December 1, 2014 to January 31, 2015, and would increase to Rs 4 for the next two months. It would further rise to Rs 6 from April 1, 2015 for two months, then to Rs 8 for next two months and finally to Rs 10 with effect from October 1, 2015.

In a response to an email query, MCX-SX spokesperson said that they would not like to comment on this matter. BSE too declined to comment. BSE started trading in the currency derivatives segment in November last year. The volumes on the exchange have steadily increased from a daily average of Rs 325 crore in November 2013 to nearly Rs 6,400 crore last month.

MCX-SX, on the other hand, has seen its market share in currency segment dipping from nearly 40 per cent in August last year to just 12 per cent last month.

The exchange's market share decline coincided with breaking out of Rs 5,600 crore settlement crisis at Jignesh Shah-led National Spot Exchange (NSEL). Financial Technologies India (FTIL), the parent company of NSEL, is the founder of MCX-SX.

Industry players say that the MCX-SX's credibility took a hit following the NSEL scam. MCX-SX, however, since last year has taken steps to distant itself from its founder FTIL. It recently moved to terminate warrants held by the erstwhile promoter.

MCX-SX, in 2011 moved the anti-competitive authority against NSE. CCI had imposed a penalty of Rs 55 crore on NSE for adopting unfair trade practices. The penalty was upheld by Competition Appellate Tribunal (COMPACT) last month.