The shareholders say not charging transaction fees in a fast-growing segment is actually a loss of income for the exchange and, in turn, a loss for the shareholders.
Domestic institutional shareholders, who together hold around 39 per cent stake in the National Stock Exchange, are unhappy with the exchange's strategy of not charging transaction fees in the currency derivative segment.
NSE was recently pulled up by the Competition Commission of India for 'using its position of strength in the non-currency derivative segment to protect its position in the currency segment.'
These shareholders have already raised the issue at the NSE board level on the grounds that not charging transaction fees in a fast-growing segment is actually a loss of income for the exchange and, in turn, loss for the shareholders.
The top domestic institutional shareholders in the exchange are LIC with 10.51 per cent, State Bank of India (10.19), IDFC (7.88), IFCI (5.55) and Stock Holding Corporation (5 per cent).
Currency futures were launched by NSE in August 2008 and since then volumes have grown very fast.
MCX-SX and more recently the United Stock Exchange have also entered the fray and the daily average volume of currency derivative trading on all the three exchanges has now crossed Rs 45,000 crore (Rs 450 billion).
NSE's competitors could not levy a transaction fee as India's largest exchange and make losses as unlike NSE, they are present only in the currency segment.
The exchange's view, then,
was that fees should not be levied as the exchange traded currency derivative market is just beginning and will take time to achieve its full potential.
One of the institutional shareholders in NSE said domestic institutional investors have been requesting the exchange to consider a transaction fee, as trading has picked up in the segment.
"We are also concerned about the likely fallout of the CCI's final order in the case filed by MCX-SX. If penalty is imposed, all of us would suffer. This could have been avoided," he said on condition of anonymity.
One of his major concerns was that the NSE management had not found it necessary to apprise the board of the risk associated with the case filed before CCI.
The CCI views followed a petition filed by MCX-SX that said NSE was using its dominant position in the exchange space by cross-subsidising the currency derivative segment with the help of huge income from the equity segment.
NSE is amongst the most profitable companies of the country and in 2010-11, its net profit after tax was around Rs 625 crore (Rs 6.25 billion).
A huge increase in volumes in the equity derivative segment has helped the exchange to earn Rs 780 crore (Rs 7.8 billion) by way of transaction charges.
In 2008-09, when currency derivative trading was launched, income from transaction fees was Rs 573 crore (Rs 5.73 billion) and profit after tax Rs 515 crore (Rs 5.15 billion).
Despite transaction fees being levied in the currency segment, NSE's profits have gone up.
An NSE spokesperson said the exchange could not comment on the matter 'that is ongoing and sub-judice'.