2019 (1) TMI 2052 - Commission - Law of Competition

Competition Commission closes case against stock exchange for alleged discriminatory co-location services under Section 26(2)

The Competition Commission of India closed a case against a stock exchange regarding alleged abuse of dominant position through discriminatory co-location ... Abuse of dominant position - alleged contravention of Section 4(2)(b)(ii) and Section 4(2)(c) of Competition Act, 2002 - basic grievance of the Informant is that by giving unfair preferential access to some trading members of its co-location services, the OP has limited and restricted the provision of services to other trading members availing the co-location service which resulted in 'denial of market access' to others to whom such unfair access was not given - HELD THAT:- The Commission observes that as per the policy of the OP as enshrined in its circular dated 31.08.2009, the co-location services are to be provided by the OP for a cost on a non-discriminatory basis. Apparently, the fee levied by the OP for providing the co-location services was uniform to all the trading members availing the services and the OP was required to provide equal benefits of the co-location services to the said trading members. However, as per the Informant, because of the alleged practices followed at OP, some trading members of the OP allegedly received preferential and unfair access to trading information, over others thereby enabling them to reap benefits viz. getting the price feeds and other data before other trading members to whom such preferential access was not provided, despite having availed co-location services. The Commission observes that discriminatory and abusive conduct which falls foul of the provisions of the Act falls within the jurisdiction of the Commission and can be independently examined by the Commission based on cogent facts and evidence. However, the allegations against the OP are yet to be established in an appropriate proceeding and also there is not sufficient information and data before the Commission about the role attributable to the OP, in the provision of discriminatory co-location services qua certain trading members, as alleged in the Information to arrive at a prima facie view. Thus, it may not be apposite for the Commission to delve into the allegations contained in the Information at present - The matter is ordered to be closed forthwith in terms of the provisions of Section 26(2) of the Act. Issues: Alleged contravention of Section 4 of the Competition Act, 2002 by the National Stock Exchange of India Ltd. through preferential access to co-location services leading to distortion of competition and undue gains to certain trading members.Analysis:1. Filing of Information: The case was filed under Section 19(1)(a) of the Competition Act, 2002 by an Advocate against the National Stock Exchange of India Ltd. for contravention of Section 4 of the Act.2. Allegations of Preferential Access: The Informant alleged that the NSE provided preferential access to certain trading members availing co-location services, distorting competition and leading to undue gains. This alleged conduct was said to contravene Section 4 of the Act.3. Abuse of Dominant Position: The Informant further alleged that NSE abused its dominant position by providing preferential access, affecting fair competition. The Informant defined the relevant product and geographic market to support these allegations.4. Evidence and Investigations: The Informant cited various reports and investigations by SEBI, ITD, and CBI regarding the alleged preferential access and unfair practices by NSE. These investigations highlighted violations and potential market abuse by NSE.5. Role of SEBI and Whistle-blower: SEBI received complaints from a whistle-blower regarding rigging of high-frequency trading systems and preferential access to market data by certain brokers. SEBI initiated investigations and ordered forensic audits, uncovering potential violations.6. Commission's Analysis: The Competition Commission of India analyzed the information filed by the Informant and observed that SEBI was already investigating similar issues. The Commission noted that the exact role of NSE in the alleged contravention was still under investigation.7. Jurisdiction of the Commission: The Commission stated that discriminatory and abusive conduct within its jurisdiction could be examined based on evidence. However, the allegations against NSE were yet to be established in a proceeding, and insufficient data was available for the Commission to form a prima facie view.8. Closure of the Case: Due to the ongoing investigations by SEBI and lack of conclusive evidence, the Commission ordered the case to be closed under Section 26(2) of the Act. The decision was communicated to the Informant and SEBI for information.This detailed analysis covers the issues raised in the legal judgment regarding the alleged contravention of the Competition Act, 2002 by the National Stock Exchange of India Ltd. through preferential access to co-location services and the subsequent investigations and decisions by the relevant authorities.