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The Competition Commission of India ("CCI/ Commission"), in a surprise turn from its previous position taken in so many cases before , has , vide order dated 07.01.2019 , decided not to inquire into allegations of abuse of dominance against the National Stock exchange of India ("NSE") .
This decision by the Commission is perceived to be influenced by the recent judgement dated 05 December 2018 of the Supreme Court in the case of CCI vs. Bharti Airtel in which the Apex court has cautioned CCI from entering into technical issues relating to the terms of the license granted by TRAI . Though the Apex Court in the said judgment has not discouraged CCI in dealing with anti-competitive issues and has acknowledged the possibility of co-ordination between the existing telecom players to challenge the maverick business model of Reliance Jio and has ,therefore , left the determination of such competition issues open by CCI subsequent to the determination on the technical issues by TRAI.
The information in this case was filed by an Advocate namely Mr. Jitesh Maheshwari against the NSE alleging abuse of dominance in the sense of unfair and discriminatory treatment in the "market for providing services of trading in securities to the trading members in India".
NSE provides the services of co-location to the trading members, who avail this facility as consumers on payment of prescribed fees. These services are offered in the form of full rack as well as half racks. The trading members who avail these services get access to information about traded prices of shares ahead of other traders, which makes a huge difference to the proprietary and high-frequency traders. The fees levied by NSE for these co-location services are the same and accordingly the trading members availing the services are expected to be kept in the same footing. However, the informant alleged that from 2010-2014, instead of providing equal and fair access to all the trading members, NSE provided preferential and unfair access to some trading members and this benefited the trading members to whom the preferential treatment was granted, in getting the price feed and other data.
The informant proposed the relevant market as the "market for providing services of trading in securities to the trading members in India" and contended that NSE is the dominant player based on its market share, dependence of consumers and regulatory barrier of entry of new stock exchange.
Consideration of the information by CCI
The Commission acknowledged that the grievance of the informant is that the NSE by giving unfair preferential access to some trading members of its co-location services, has limited and restricted the provisions of services to other trading members availing the co-location services which resulted in 'denial of market access' to others.
The CCI, however, has decided not to go into the merits of the case and has closed the case vide its order dated 7.1.2019 under section 26(2) of the Competition Act 2002 (the Act) mainly for the reason that the 'NSE Co-location Case' is currently under investigation by the Securities Exchange Board of India ("SEBI"). The Commission recognized that the genesis of the NSE Co-location case dates back to 2015, when a whistle-blower wrote a letter to SEBI alleging that NSE gave preferential access to a few high-frequency traders and broker to its trading platform. The Commission accepted that SEBI is looking at similar issues alleged in the information, however the exact role of NSE with respect to the preferential/ discriminatory services is still at the stage of investigation.
The Commission, however, also observed that the discriminatory and abusive conduct falls within the jurisdiction of the Commission and that it can be examined by the CCI based on cogent facts and evidence (apparently after the completion of investigation by SEBI ). It observed that the allegations against NSE are yet to be established in an appropriate proceedings and also a lack of sufficient information about the role of NSE to arrive at a prima facie view. Accordingly, the case was closed under Section 26(2) of the Act.
Note: This article first appeared on the Antitrust & Competition Law Blog
On 18th January 2019 .
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