BSE and NASDAQ OMX war takes legal turn

A bitter battle seems to be brewing between Asia’s oldest equity bourse and one of the world’s largest exchange technology providers. While it is already known that an agreement signed between the Bombay Stock Exchange (BSE) and OMX — now known as Nasdaq OMX — in January 2008 has gone sour, an arbitration process is being explored now. ET has learnt that BSE has already sent a legal notice to OMX.

According to people familiar with the development, BSE has sent a legal notice to OMX recently, asking for a compensation of around $137 million by way of lost business opportunity. It has also charged the technology provider with not honouring its commitments.

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It is believed that both parties, accompanied by their legal advisors, met in Mumbai about two weeks ago, but couldn’t reach any settlement. “The board has taken a call to get out of the contract with OMX as they have not kept their commitments,” said a BSE board member.

In January 2008, BSE and OMX signed an agreement, under which OMX was to provide trading and clearing systems to strengthen BSE’s derivatives and securities trading capabilities. The new platform would also have allowed BSE to clear a wider range of products, as well as offer a new set of clearing services to its members. Further, the first phase of the system rollout was scheduled for launch by mid-2008.

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However, the deal was called off later that year. BSE had already paid $5 million as the first tranche to OMX for the contract valued at $37.5 mn. OMX, incidentally, is a technology supplier to more than 70 exchanges globally.
In an emailed reply, the BSE spokesperson said: “The agreement has been terminated and as per the provision of the agreement, there is an arbitration mechanism, which is being explored.”

OMX, on the other hand, refused to comment. “Our policy is to not give detailed comments about our customers. Therefore, we will unfortunately not be able to provide you with any comment,” it said via email. Interestingly, people familiar with the development also say there is a likelihood of OMX filing a counter-suit against BSE in London.

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source - www.economictimes.com