Mumbai: The National Stock Exchange of India Ltd (NSE) has appealed to the Bombay high court to repeal an earlier order appointing two new auditors to test the trading software of Financial Technologies (India) Ltd.
Against the move: NSE has said that the judge’s decision to appoint two auditors amounts to ‘rewriting the contract between the parties’. Abhijit Bhatlekar / Bloomberg
India’s largest bourse has challenged the court’s 30 January order by a single judge that appointed audit and consultancy firm Deloitte Touche Tohmatsu and technology company Wipro Ltd to audit the software used by brokers to connect to the exchanges.
NSE has said in its appeal that the judge’s decision to appoint two auditors amounts to “rewriting the contract between the parties”.
The software, which allows brokers to access different products on different stock exchanges on a single screen, has been at the centre of a legal battle between NSE and Financial Technologies after the exchange kept the firm on a watch-list and rejected its application for providing the software.
Financial Technologies, in its Bombay high court lawsuit, had said NSE had put it on a watch-list with “malafide intentions of stifling competition”. The firm has a 32% stake in the Multi Commodity Exchange of India Ltd (MCX), the country’s largest commodity exchange that has at least an 80% share of the business. It claims to have sold 400,000 software licences.
In a 12 January order, the high court said, “The allegations in respect of malafides” have “considerable substance”, but without giving an opportunity to NSE to reply “it is not proper to decide as to whether the complaint regarding the defective software...is reasonable” and whether NSE’s approach is “rather malafide” towards Financial Technologies. Subsequenly, on 30 January, it ordered for a systems audit and said NSE should not deny approval for the product for new users and existing users should continue to use it.
In its appeal, NSE has said it had placed Financial Technologies on a watch-list in “good faith”, based on deficiencies in the software reported by trading members.
The exchange noted that Financial Technologies, like other software vendors, had agreed to comply with certain terms and conditions, including software quality and access only to authorized persons. According to the undertaking, NSE had the right to appoint auditors to test the software whenever it thought necessary.
Financial Technologies “miserably failed and neglected to comply with the terms and conditions of the undertaking as an approved vendor”, NSE said in its appeal.
The country’s largest exchange has provided 10 instances where its members had complained about Financial Technologies’ software, even citing specific complaints. Mint couldn’t independently verify these.
NSE had earlier appointed an auditor, iSec Services Pvt. Ltd, to test the software, but Financial Technologies did not agree to it.
MCX-SX, a stock exchange promoted by MCX and Financial Technologies, competes closely with NSE in currency futures.