The National Stock Exchange has suffered three reverses in just one week: The Delhi HC verdict that it falls under the RTI Act; the verdict in the case filed by an ex-employee and finally, an order by the Competition Commission about its predatory practices

The National Stock Exchange (NSE), which projects the image of a government organisation, has been fighting multiple cases. In a sudden reversal of fate, it has suffered three blows in just one week. On Monday came the news that the Competition Commission of India has ordered an investigation into its predatory practices in the currency derivatives segment to kill the upstart competitor MCX Stock Exchange. Then, the Bombay High Court turned down its application to block a case in the lower courts, under which former employee A Sebastin has charged NSE of tarnishing his reputation (see here).

Finally, NSE’s effort to stay outside the public scrutiny under the Right to Information (RTI) Act has been thwarted. In a significant judgement, the Delhi High Court recently quashed NSE’s appeal against an earlier order by the Central Information Commission (CIC), rightly declaring the stock exchange as a public authority.

With this order, the stock exchange will now fall under the ambit of the RTI Act. As such, it will be forced to disclose information demanded by the public on various matters, subject to certain exceptions.

However, the embattled exchange may not take the order lying down and may soon appeal to the apex court, the Supreme Court of India. When Moneylife contacted an NSE official for their future plan of action, we were told that an immediate response would not be available. 

In another similar case, the Bombay Stock Exchange (BSE) has moved the Bombay High Court.

The NSE has been vehemently fighting against any attempt at putting itself in the public eye, despite claiming to be a company run by ‘professionals’. Its contention is that, being an autonomous body with no government control over it, it cannot be forced to disclose information under the transparency law.

The exchange’s apprehension over disclosing company information has baffled many RTI activists and lawmakers alike. It is being viewed as desperate attempts on part of the exchange to cover up its various misdeeds.

The lack of transparency surrounding stock exchanges in the country is not surprising given that none of the exchanges are listed. This itself is highly detrimental to the interests of investors, shareholders and the society at large. Institutions which are at the core of stock-trading activities should be the first in line to bear the consequences of reckless trading and subterfuge of certain market participants.

The CIC had announced in June 2007 that all registered stock exchanges are public authorities under the RTI Act and therefore these organisations are obliged to give information to any requisitioner under the Act. The CIC had given its decision in response to two appeals filed by the NSE and the Jaipur Stock Exchange.

The CIC had made it perfectly clear that functioning of all recognised stock exchanges are under the ‘deep and all-pervasive close control’ of the Central government and hence they fall within the definition of ‘public authority’ under the RTI Act. The CIC in its ruling had elaborately enumerated various provisions of the Securities Contract Regulation Act (SCRA) to underscore the control that the government exercises over stock exchanges.

Yet, the NSE remained adamant and approached the higher judiciary challenging the interpretation pronounced by the CIC and obtained a stay order.

However, with the Delhi HC upholding the CIC order, the NSE has very few cards left to play. It will no doubt bring out every last trick in its bag to ensure that transparency and disclosures continue to remain outside its domain of ‘professional’ activities.