Sucheta Dalal

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August 10, 2010

It is not the first time that MCX-SX has approached courts to seek legal redress as SEBI’s silence and favouritism is killing it

As we said, this is not the first time that MCX-SX has been forced to seek legal redress because SEBI’s silence and favouritism is killing it. It is a matter of simple equity and fair-play that SEBI must ensure a level-playing field between bourses. Yet, MCX-SX, the market leader in currency derivatives, cannot earn any revenue, because the NSE has not levied any charges on this segment and cross-subsidises it through its monopoly in the equity derivatives market and near-monopoly in the cash segment. SEBI’s refusal to check such predatory pricing forced MCX-SX to approach the Competition Commission, which has admitted the case. The Reserve Bank of India, which jointly regulates currency derivatives, has also watched in silence. Yet, it protests at the creation of a committee to decide turf issues.

This, too, is not the first time that Jignesh Shah’s group has been forced to approach the courts. Even earlier, it approached the Bombay High Court over NSE declaring that its broker front-end software (ODIN) was flawed and placed a bar on fresh installations or licences. ODIN has 85% market share. NSE is trying to introduce its own software (NOW) through a subsidiary and was offering it free for three years.

The twin actions would have forced Financial Technologies (FT), a pioneer in trading software, out of business. FT approached SEBI and, on failing to get a response, went to the Bombay High Court. The Court observed that the “allegations in respect of mala fides have considerable substance” and that “NSE can’t use its whims and fancies to pick and choose vendors.” As things stand, the Court has ordered an audit of the software by KPMG—something that the regulator should have done. Instead, SEBI even ignored media queries on what was clearly a serious market issue. Incidentally, it is over a year since NSE’s declaration that the ODIN software was flawed, but there are no reports of crashes or problems on that account. The MCX group is not alone in complaining about SEBI’s arbitrary policies and actions, but it alone is in a situation where a few hundred crores of investment is at stake, despite proven market leadership in commodities and now in currency derivatives as well
. — Sucheta Dalal

-- Sucheta Dalal