NSE, BSE-owned clearing house may bury the hatchet on Sebi’s informal nudge

Markets regulator Securities and Exchange Board of India is informally nudging the NSE and Indian Clearing Corporation Ltd (ICCL) to resolve matter at the earliest, the people said on the condition of anonymity as they are not authorized to speak to the media. The regulator has asked one of its officials to keep a tab on this resolution, they said.

Widespread reporting of the issue in the press in the past few weeks seems to have prompted Sebi to informally mediate, encouraging both parties to reach a resolution, said the people.

Queries emailed to Sebi and ICCL remained unanswered till press time.

Ketan Mukhija, senior partner at law firm Burgeon Law, said Sebi cannot get involved formally. But its role as a regulator allows Sebi to informally nudge parties towards a settlement through guidance, informal discussions, or policy clarifications, he said.

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“To resolve the issue, the NSE and ICCL could engage in independent audits to verify claims, establish a standardized fee framework, or seek (formal) mediation to ensure fair resolution,” Mukhija said.

Clearing houses act as an intermediary to settle trades. ICCL is looking to gain a larger share of the business, which is dominated by NSE Clearing Ltd (NCL), a wholly owned subsidiary of the NSE with about 95% market share.

The dispute, which came to light in October 2023, stems from non-payment of dues by the NSE to ICCL citingalleged overcharging for clearing services provided to settle transactions. The controversy intensified after ICCL issued a demand notice to NSE in early February, seeking over ₹100 crore under the interoperability framework.

The interoperability framework of 2019 allows market participants to clear and settle trades executed on different stock exchanges through their preferred clearing corporation, enabling seamless trading across multiple exchanges even during technical glitches. This is achieved by linking different clearing corporations together.

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Allegations and counterclaims

The dispute arose when the two exchanges disagreed on the fees associated with clearing and settling trades.

Business Standard reported on 20 February that the dispute over clearing charges between the NSE and ICCL had intensified, with India’s largest exchange accusing the clearing corporation of “overcharging”.

ICCL, however, has maintained that its charges are standard under the framework, one of the people cited earlier said.

NSE has claimed that ICCL has been charging double the rates to NSE for a long time. NSE has overpaidICCL, a spokesperson for NSE said in response to Mint’s queries.

The NSE noticed the double charging in 2022 and informed ICCL, but the clearing corporation continued to charge the inflated rates until last month, the spokesperson said. “The total overpayment by NSE to ICCL due to double charges exceeds ₹113 crore.”

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The spokesperson said ICCL issued corrected invoices for the period from April to December 2024, with a total of ₹37.51 crore, which the NSE cleared as of last week. However, disputes remain over earlier charges.

“Double charge bills raised and collected by ICCL from NSE to the extent of more than ₹51 crores are still to be processed and sent to NSE by ICCL” the spokesperson said.

After a recent meeting with Sebi, the NSE asked ICCL to issue a revised credit note of ₹51 crore, which, according to the exchange, will resolve the matter related to excess charges, the bourse’s spokesperson said.

According to ICCL, clearing corporations have been charging exchanges since the implementation of the interoperability framework, which predates the current management at the BSE and ICCL.

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“The exchanges have been giving quarterly confirmations to clearing corporations that their framework computations are correct, including from the NSE to ICCL till December 2023,” said sources aware of ICCL’s position. “Despite this, the NSE had not paid since the quarter ended September 2023.”