MoF approves commodity market rules

Kathmandu, November 24

The Ministry of Finance (MoF) has approved the Commodity Market Regulations, thereby setting up the legal background for operating the commodity market.

Securities Board of Nepal (SEBON) — the capital market regulator — had prepared and submitted the draft of the regulation to the MoF as per the provision of Commodity Act endorsed by the Legislature-Parliament on July 31.

According to a provision of the act, the regulation has to be implemented within 90 days after it is authenticated by the president. President Bidhya Devi Bhandari had authenticated the act on August 27, which meant that SEBON had to implement the act from November 27, and the MoF approved the regulation today.

“As the government has set the legal framework for operating the commodity market, the new regulation has been implemented from today and the market will be regulated as per the provision of the newly implemented law,” said Niraj Giri, spokesperson for SEBON.

As per the provision of the regulation, SEBON will issue operating licence to those companies that are interested in commodities exchange, trading, payment and settlement, and operating warehouses.

Giri informed that the regulation has set a minimum paid-up capital of Rs 500 million for the establishment of a commodity exchange company. For others, SEBON will fix the minimum paid-up capital.

Similarly, according to the law, a single domestic shareholder cannot hold more than five per cent of shares in the company. However, foreign investors, who are interested to be a strategic partner in a commodities company, can hold up to 51 per cent of shares.

Nepal Derivative Exchange, Derivative and Commodity Exchange, and the Mercantile Exchange Nepal are in operation as commodity exchange companies at present. As per a provision of the law, commodities exchange companies can also opt for merger or acquisition process.

A commodities exchange is an exchange where various commodities and derivatives products can be traded. Commodities that are traded in the exchange market are agricultural products and other raw materials.