TaxTMI 
TaxTMI 
2019 (1) TMI 2052
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Competition Act, 2002 ('Act'). 2. At the outset, the Informant has highlighted that the 'NSE Co-location case', which is currently being investigated by Securities Exchange Board of India ('SEBI'), Income Tax Department ('ITD') and Central Bureau of Investigation ('CBI') and upon perusing various media reports on the same, the Informant is of the opinion that the case must also be investigated by the Competition Commission of India ('Commission') to assess if there is a possible contravention of the provisions of Section 4 of the Act. 3. The Informant has submitted that the OP, vide its circular bearing number NSE/MEM/12985 dated 31.08.2009, had announced the launch of 'co-location....
X X X X Extracts X X X X
X X X X Extracts X X X X
....members to whom such preferential access was not provided. The Informant has also alleged that this distorted the competition between the trading members availing the co- location facilities from the OP, leading to undue gains to the trading members to whom such preferential access was provided. 6. The Informant also alleged that the OP has abused its dominant position by providing preferential access to certain trading members of its co-location services, resulting in contravention of the provisions of Section 4 of the Act. For substantiating these allegations, the Informant has stated that the OP is providing services to its trading members which are neither inter-changeable nor substitutable for a consumer by reason of characteristics o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id decisions and material provided on volume of trades etc., the Informant claimed that the OP holds a dominant position in the relevant market. 8. The Informant has submitted that para 3 at page no. 21 of the Draft Red Herring Prospectus ('DRHP') of the OP mentions about the co-location case. This is currently pending with the SEBI. It has been stated that upon receiving the complaints against the OP regarding providing of unfair access of the co-location facility to select trading members, SEBI constituted a team headed by professors of the Indian Institute of Technology, Bombay to look into the said complaints. The interim report of the team observed that the OP has violated norms of fair access and compromised market fairness a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stle-blower to SEBI on NSE rot', has provided excerpts of both the letters. It had been stated in the media report that the whistle-blower vide these letters has stated that due to favorable access, certain brokers and their clients were benefited against whole market every day for at least more than five years which comprised of trading volume of roughly Rs. 2-3 lakh crores per day. 12. The Informant has averred that the whistle-blower wrote another letter dated 14.12.2017 to Ministry of Finance, which was published by Moneylife titled as 'NSE whistleblower's 4th letter alleges rigging of currency market; manipulation at NSE' and has levied allegation against the OP of rigging in the rupee-dollar trading that gives an unfa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers on the exchange had unfair access to market data and trading systems. The Informant has also stated that media report on SEBI's probe into the OP's algorithmic trading platform had highlighted that some traders had unfair access to market data and trading systems. The Informant has submitted that upon completion of the SEBI's investigation and on the basis of the above stated reports, SEBI initiated enforcement proceedings against the OP. 15. Based on the aforesaid facts and allegations, the Informant has inter-alia prayed for an investigation under Section 26(1) of the Act. Further, the Informant has also prayed for an interim order to restrain the OP from carrying out anticompetitive activities under Section 4(2)(b)(ii) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovided, despite having availed co-location services. 19. As stated by the Informant in his information, the case is currently under adjudication by SEBI. The Commission observes 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 brokers to the exchange's trading platform. The following excerpts from the OP's DRHP, enclosed with the information, may be relevant in this regard: "SEBI while reiterating the observations of the CFT/IIT Interim Report through its letter dated September, 2016, or the Observation Letter, among other things, observed; (i) that the architecture of our Company with respec....