MCX-SX welcomes Compat decision against NSE's appeal

Welcoming the Competition Appellate Tribunal's decision to uphold a CCI order against NSE, rival stock exchange MCX-SX today said dominant entities have a special responsibility not to distort competition.
It was on a complaint by MCX Stock Exchange that the fair trade regulator initiated a probe and passed an order in 2011 against NSE with a fine of Rs 55.5 crore for abuse of dominant market position in the currency derivatives market.
NSE later moved Compat against the Competition Commission of India (CCI) order. After hearing the matter for about three years, Compat today upheld the CCI order.
MCX-SX MD and CEO Saurabh Sarkar said: "We welcome the order passed by Compat upholding the CCI Order. We believe that healthy competition is always in the interest of overall development of Indian Financial Markets.

"The Compat order reaffirms the position that dominant undertakings have a special responsibility not to distort competition in the sectors where they operate through their actions."
The Tribunal has dismissed the NSE appeal and upheld the CCI order in respect of zero pricing carried out by NSE in its currency derivatives segment between October 2008 and August 2011, MCX-SX said in a statement.

The exchange further said that the order also clarifies the definition of 'relevant market' as the entire 'stock exchange services market in India', as was argued by MCX-SX.
"NSE's argument that relevant market is 'stock exchange services for CD Segment in India' has been rejected by Compat. The directions issued by CCI has been upheld, including the penalty of Rs 55.5 crore along with interest.

"In addition to this, NSE has been asked to cease and desist from predatory pricing and scuttling competition. The CCI direction to NSE to maintain separate accounts for CD Segment has not been continued as the same was not necessary in view of revised definition of relevant market," it added.
MCX-SX launched trading in currency derivatives segment in 2008 and it says it was unable to charge any transaction charges and other fees on account of free offering by NSE.
A year later, in November 2009, MCX-SX filed a complaint in CCI against NSE for using its dominant position to engage in predatory pricing in the currency derivatives segment.

According to market sources, the Compat order could also have some implications for other entities as well, including for the other exchange BSE which has been offering zero pricing since launch of its segment and had also written to the regulator Sebi for extending the zero pricing.
After the CCI order, MCX-SX had also begun contemplating seeking a compensation to the tune of Rs 500 crore for lost business opportunity due to unfair pricing.
Sources said the Compat order would enable MCX-SX now to file for compensation, although the exchange officially did not say anything on this front.
Any potential move in this regard would help the exchange in its efforts to regain its eroding networth and boost sentiments of its potential investors.