1. Background

1.1 The instant case relates to competition concerns arising in the stock markets services in India, which is an important part of the financial market in the country. Therefore, it is essential to outline a brief history and nature of this sector at the start for putting the market dynamics in a perspective.

1.2 Financial market can broadly be divided into money market and capital market. Securities market is an important, organized capital market where transaction of capital is facilitated by means of direct financing using securities as a commodity. Securities market can further be divided into a primary market and secondary market.

1.3 Primary market is that part of the capital markets that deals with the issuance of new securities. It is where the initially listed shares are traded first time, changing hands from the listed company to the investors. It refers to the process through which the companies acquire capital through the sale of new stock or bond issue to investors. This is typically done through a syndicate of securities dealers.

1.4 The secondary market is an on-going market, which is equipped and organized with its own infrastructure and other resources required for trading securities subsequent to their initial offering. It refers to a specific place where securities transaction among several and unspecified persons is carried out through the medium of the securities firms such as licensed brokers or specialized trading organizations in accordance with the rules and regulations established by the exchanges and the extant laws and regulations laid down by the regulators. Such an institution is called a stock exchange.

1.5 Stock exchanges are enmeshed in the economy of a nation and are the most important mechanism of transforming savings into investments. Over the ages, as economies developed, industrialization occurred and markets became more organized, a need for permanent finance was felt world over. Entrepreneurs needed money for long term whereas investors also required liquidity. The answer was development of the institution of stock exchanges.

1.6 A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities or derivatives. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

1.7 A stock exchange is any body of individuals, whether incorporated or not, constituted for the purpose of regulating and carrying out the business of buying, selling or dealing in securities or derivatives. These securities broadly include:

(i)Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ii)Government securities and

(iii)Rights or interest in securities.

1.8 The origin of the stock market in India goes back to the end of the eighteenth century when long-term negotiable securities were first issued. However, for all practical purposes, the real beginning occurred in the middle of the nineteenth cent