CCI Report Accused NSE of Misusing Position

A 245-page report prepared by the Competition Commission of India (CCI) that was brought out in November 2010 presented a detailed account of how the National Stock Exchange (NSE) over several years abused its dominant position and financial muscle to stifle competition in the country’s stock exchange space. The investigation carried out by CCI discovered that NSE violated Section 4(2) (a)(ii), and Section 4(2)(e) read with 4(1) of the Competition Act, 2002. Following the findings of the investigation, the CCI suggested several remedial measures which could lead to the division of NSE into more than one entity. According to the CCI the division of NSE would promote competition in India’s stock exchange business.

The investigation carried out by the director general after the commission was started after CCI received a complaint from MCX Stock Exchange (MCX-SX ) relating to the NSE's way of functioning. SEBI in a letter to MCX-SX dated 1 October 2009 had asked MCX to look into NSE's alleged "predatory pricing" strategies in the currency derivatives segment. SEBI in the letter had mentioned that predatory pricing was not under the jurisdiction of SEBI but under the ambit of Competition Act. MCX-SX’s decision to move the CCI rested in SEBI’s letter. The investigation looked into- the complaints related to NSE's abuse of dominant position, its predatory pricing strategy for various trading segments (equity, derivatives, Gold ETF, debt market etc), charging or waiver of transaction fees aimed at eliminating competition as well as its measures to destroy competition through waiver of fee for data supplied to vendors.

As NSE violated several provisions in the act, CCI is in a position to take remedial steps, under Sections 27 and 28 of the Competition act. If the commission feels fit it can under Section 28 of the act order the division of NSE into more than one company. Under Section 27, the commission can also order an entity to change the way it does business using its dominant position which may harm competitors.

The investigation conducted by CCI is the commission’s first major investigation since the provisions of the Competition Act, 2002, relating to anti-competitive agreements and abuse of dominant position were, notified on 20 May 2009.