The Competition Commission of India (CCI), the fair-trade watchdog, has issued a penalty notice to National Stock Exchange, the country's largest bourse, on a complaint related to abuse of dominant market position in the currency futures business. NSE faces a penalty of up to 10% of the average revenues for the last three years, sources said. According to data available on the NSE website, its total income in 2008-09 was Rs 1,024 crore, which rose 24% to Rs 1,266 crore during the year-ended March 2010. The numbers for 2010-11 are yet to be reported.
Despite repeated attempts, an NSE spokesperson did not answer any of the queries. Currency futures are a tool to help exporters and others dealing in foreign exchange to hedge their risks on exchange rate fluctuations. Though trades initially started with rupee-dollar contracts in August 2008, additional currency pairs of the rupee with the sterling pound, Japanese yen and the euro were launched in February 2010.
Sources said though the penalty notice to NSE prima facie establishes the case against the exchange, it also offers an opportunity to the defendant to make an argument against CCI's observations. The competition watchdog that became functional only a couple of years ago is yet to issue the final order, which can be challenged in the Competition Appellate Tribunal.
The complaint was filed by MCX Stock Exchange, NSE's rival in the currency futures space which has plans to enter the equities and interest rate futures business. The Securities & Exchange Board of India (Sebi) has held back approval for MCX-SX saying that it does not meet the prescribed shareholding norms. MCX-SX is contesting the Sebi decision in the Bombay High Court.
MCX-SX had approached CCI saying that in the absence of NSE levying transaction charges for currency futures it was forced to follow suit. NSE was accused of using its dominant position to affect market behaviour.
In terms of volumes and value of transactions in currency futures, the gap between NSE and MCX-SX does not appear to be too large, according to data on the website of the two exchanges. For instance on Thursday, currency futures volumes on NSE were estimated at 60 lakh contracts, while on MCX-SX it was 49.4 lakh. The value of trade on NSE was estimated at Rs 27,415 crore, while on MCX-SX it was Rs 22,637 crore. In November 2010, TOI had reported the findings of CCI director-general which had found violations of several sections of the Competition Act, 2002.
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