Kathmandu, December 6

The Securities Board of Nepal (SEBON), the securities market regulator, has directed Nepal Stock Exchange (Nepse) and CDS and Clearing Ltd (CDSCL) to launch fully automated share trading, securities ownership transfer and clearance services from January 15.

As per the directive issued today, Nepse and its subsidiary CDSCL will have to start trading dematerialised shares beginning January 15. “The use of dematerialised shares will modernise stock trading in the country,” says a statement issued today by SEBON.

Dematerialisation is the process of converting physical shares into electronic format. Currently, 119 listed companies are trading dematerialised shares.

“To begin use of dematerialised shares here, all listed companies will have to dematerialise their shares within January 14,” says the statement. “Listed companies that fail to dematerialise their shares within January 14 will not be allowed to trade their stocks at Nepse beginning January 15.”

However, this condition will not apply to stocks of companies that are undergoing liquidation process, shares whose trading has been suspended, listed companies that have been suspended and listed companies that are undergoing merger process, says the statement.

Once the trading of dematerialised shares begins, Nepse will be able to fully enforce the provision of T+3, under which all payments have to be settled within three days of share trading. Early settlement of payments is expected to increase transaction volume on the stock market.

The SEBON has also directed Nepse and CDSCL to make information on market depth available to all shareholders. The information on market depth, which gauges a market’s ability to accept large orders without impacting the price of shares, is currently shared among stockbrokers.

“The practice of sharing information on market depth will enable ordinary investors to make informed decision,” says statement.

Among others, SEBON has directed brokerage companies to create a different trading window for women, disabled, children and other small investors. It has also instructed share registrars to provide seamless service by developing necessary infrastructure and deploying adequate human resources.

The history of securities market in Nepal dates back to 1937 when Biratnagar Jute Mills and Nepal Bank Ltd floated shares. The government then established Securities Exchange Centre in 1976 with the objective of facilitating and promoting the growth of capital markets.

The government converted Securities Exchange Centre into Nepse in 1993. Members of Nepse act as intermediaries in buying and selling of government securities and listed shares.