NSE board to discuss CCI penalty issue

The National Stock Exchange's (NSE) board of directors may discuss tomorrow an order from the Competition Commission of India (CCI) to pay a penalty of Rs 55.5 crore and to refrain from its "unfair trade practices".

NSE's board is likely to meet for the first time tomorrow after the CCI order and the matter is likely to be a key point of discussion at the meeting, sources said.

While an NSE spokesperson did not comment on the issue, there were talks about some shareholder nominees on the board considering to express their concern on the CCI matter.

The NSE management may also apprise the board about its future course of action with regard to the CCI order. The board has nominees from shareholders like SBI, IDFC and LIC.

In the country's first major penal action for anti-competitive business practices, the CCI imposed the penalty last week after pronouncing NSE guilty of abusing its dominant market position with regard to its currency derivatives trading segment.

The CCI also asked the bourse to cease and desist from its predatory pricing policies with immediate effect.

In the order passed on June 23, CCI asked NSE to pay the penalty within 30 days, while the bourse was aksed to stop subsidising its services with immediate effect.

After the order, NSE had said that it would decide its future course of action after reviewing the order and consulting its legal advisors.

Besides the penalty of Rs 55.5 crore, NSE could also face claims from its rival bourse MCX Stock Exchange (MCX-SX), on whose complaint the CCI had begun a probe and finally announced its order pronouncing NSE guilty.

Welcoming the CCI order, MCX-SX's CEO and MD Joseph Massey had said that their next course would be to claim compensation for the  losses and damages incurred due to the predatory pricing by NSE.

While Massey did not quantify the compensation to be sought, sources said that MCX-SX estimates its business loss so far in the business at about Rs 150 crore, while it would also claim damages and losses for opportunity costs, legal costs and other matters from NSE.

Together, these claims could total into anything between Rs 300-500 crore and would be independent of the Rs 55.5 crore penalty imposed by CCI, for which a demand notice has already been issued by the commission along with its order.

The penalty and claims together could form a significant chunk of the NSE's full-year profits, which stood at Rs 686 crore in 2009-10 and at Rs 576 crore in the year before that. The figures for the year 2010-11 are not yet available.