9911796707
TMI Blog2013 (2) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... nover of the RSEs (including UPSE) started eroding which adversely affected their operations. In 1999, the Securities and Exchange Board of India (SEBI) envisaged a route to rescue the RSEs. The suggested route required the RSEs to form a subsidiary company. This subsidiary was permitted to acquire membership of stock exchanges such as NSE (the opposite party), BSE (Bombay Stock Exchange) etc. and the members of the RSEs could obtain sub-brokership of the subsidiary company and could trade there. UPSE accordingly formed a subsidiary (the informant) in the year 2000 and obtained membership of BSE. In response to the constant demand from its members, the informant obtained membership of NSE in 2009 by paying a high deposit (Rs. 2.71 crores) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt position by the opposite party in the securities market. Therefore, the informant has prayed the Commission to initiate an investigation under section 26(1) to scrutinize the conduct of the opposite party under section 4 of the Act. 4. The Commission has considered the submissions and materials provided by the parties. The definition of relevant market proposed by the informant viz 'securities market in India' seems to be correct. It may be relevant here to note that the Commission had held opposite party to be dominant in the 'Currency Derivative segment in India' in an earlier case [MCX Stock Exchange Ltd. Ors. v. National Stock Exchange of India Ltd. Ors. (13 of 2009)]. Though the relevant market is much broader in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges. Membership at the opposite party stock exchange was open to different categories of persons who fulfilled the eligibility criterion laid down by SEBI and opposite party. For purposes of risk assessment, opposite party treated individuals and partnership firms as one class of members, ordinary corporate members as another class of members, and RSEs as a third class of members. Market integrity was the essence of any financial market and therefore, to pre-empt market failures and protect investors, SEBI and the stock exchanges developed a comprehensive risk management system, which was constantly monitored and upgraded. It encompassed capital adequacy of members, deposit and adequate margin requirements, limits on exposure and turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, opposite party was granting indirect membership to many members of the RSE who would otherwise had to directly obtain its membership by paying the deposit fee. 7. Another important difference between ordinary corporate members and RSE member lies in the liability for paying shortfall in the margins to the opposite party stock exchange. In case of shortfall in the margins payable to the stock exchanges (like opposite party), an ordinary corporate member is directly liable to meet the shortfall to opposite party, whereas the RSE Member has to necessarily collect the shortfall from its sub-brokers to pay to the opposite party. This is because, under the spirit of the SEBI regulations governing RSE Members, the RSE Members can neither us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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