NSE calls off Nasdaq tech deal signed in 2018

PALAK SHAH Mumbai | Updated on October 13, 2021

Domestic bourse to upgrade system in-house for its clearing arm

Four years after it was signed, the technology deal between Nasdaq and the National Stock Exchange (NSE) has turned out to be unsuccessful and hence called-off, sources told Business Line. Nasdaq was to upgrade the software for NSE’s clearing and settlement arm, NSCC, but the Indian exchange did not seem satisfied with the work as Nasdaq had a different work approach, the sources said. The NSE did not respond to a query from the BusinessLine.

Customised software

Several billions of rupees worth of trades are conducted on the NSE daily mainly in the equity, currency derivatives and cash segments.

It requires a real-time smooth settlement process for security transactions and also clearing that involves updating the accounts of the trading parties and arranging for the transfer of money and securities.

Nasdaq was supposed to deliver a customised real-time clearing, risk management and settlement technology to NSE utilising the Nasdaq Financial Framework to enable all asset classes to be cleared and settled in one system.

Exchanges are now more like fintech companies and failure to upgrade can affect business, experts say.

CDSL overtakes

Competition between domestic depositories NSDL and CDSL are a case study. Since its inception nearly 30 years ago, NSDL was the largest depository with nearly 70-80 per cent market share till late 2019. But in the past couple of years CDSL, which took a technology upgrade, not only overtook NSDL in market share but has been able to corner a much higher market share.

Earlier this year, the NSE had declared that it suffered a loss of ₹68.23 crore on account of clearing and settlement related software. But in the June quarter the NSE reversed the loss on account of compensation from Nasdaq, the sources said. Nasdaq has paid a compensation of nearly ₹84 crore to NSE.

MCX-UK vendor tussle

NSE and Nasdaq is the second major software related deal to have gone sour in domestic exchange space.

The other deal that has failed to materialise was between MCX and little known London-based software vendor PSEB, which has now dragged the commodity bourse to arbitration proceedings in London.

MCX has been trying to acquire software for its upcoming spot exchange since 2019. The exchange is now planning to write-off nearly ₹20 crore that it had paid PSEB for delivering the software.

Published on October 13, 2021

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