CAT dismisses NSE appeal against CCI order over unfair practices

The Competition Appellate Tribunal (CAT) today upheld an order passed against the National Stock Exchange by the Competition Commission of India (CCI), which had held the bourse guilty of abusing its dominant market position in currency derivatives and fined it Rs55.5 crore.

"We do not see any merits in the appeal (by NSE) and dismiss the same," CAT said in its 95-page order.

The NSE had filed the appeal against the CCI order nearly three years ago.

In May 2011, the competition watchdog had found NSE guilty of abusing its dominant market position and adopting unfair trade practices in currency derivatives trading.

The NSE then appealed against the decision, saying "whatever it has done was in the interest of the development of the capital markets".

A month later, CCI also imposed a fine of Rs55.5 crore on the country's leading bourse for abusing its dominant market position, and asked it to stop unfair trade practices. At that time, it was the CCI's first major penalty against anti-competition practices.

Subsequently, NSE challenged CCI order before the CAT, which had granted a stay in September 2011. The CCI had begun its probe against NSE following a complaint by rival stock exchange MCX-SX.

Welcoming the CAT order, MCX Stock Exchange chief executive Saurabh Sarkar said that dominant entities have a special responsibility not to distort competition.

Earlier after CCI order in 2011, MCX-SX had said it would seek compensation to the tune of Rs500 crore for lost business opportunity in the wake of NSE's unfair practices.

NSE on its part said that "it will appeal the order of Compat and .. Do the needful after going through the detailed order... A suitable review of the implications will be done in due course."

While the exchange did not specify further details on its next course of action, a Compat order can be challenged only in the Supreme Court.

 In its order, the CAT said that "It has been held by the CCI that besides the abuse of dominant position ... it (NSE) has cross subsidised from other segments of business ... it also camouflaged its intentions by not maintaining separate accounts for the CD (currency derivative) segment.

"NSE created a facade of the nascency of market for not charging any fees on account of transactions in the CD segment, it expressed that the small pockets were bound to be thrown out of the market, if they had also followed the zero transaction fee policy, which was adopted by NSE by incurring huge losses."

 The tribunal further said that "NSE was making tons of profits from the relevant market on account of its services in the other segments. Therefore, there can be no justification for taking any lenient view.