Kathmandu, December 27

The much-awaited plan to modernise the country’s only secondary market has been further delayed as the Nepal Stock Exchange (Nepse) and Securities Board of Nepal (SEBON), the securities market regulator, have locked horns regarding the procedural issues of the modernisation drive.

The process to develop a fully automated online trading system has been facing a major hurdle in the procurement of software as SEBON has instructed Nepse to procure an internationally compatible system against its move to procure software through local bidding.

Nepse had started the software procurement process early this year and selected YCO Pvt Ltd for supply, delivery, installation and commissioning of the fully automated online trading system on February 16 through local bidding.

However, the capital market regulator, on March 11, wrote to Nepse objecting the latter’s move and urged it to adopt a global bidding system to acquire an internationally compatible online trading system. SEBON has cited that an internationally credible system is the need of the hour for cross-border listing/trading of stocks to bring investment in the stock market from foreign institutional investors, non-resident Nepalis and others.

However, Nepse has said that even if it decides to install an internationally compatible system abiding by the regulator’s instruction, the system cannot be operated as per international values and norms without the user acceptance testing (UAT) system. And UAT is not possible due to lack of capital account convertibility in the country.

Due to this concern, Nepse had again written to SEBON requesting it to review its earlier instruction. But SEBON wrote back to Nepse reminding it that earlier in 2007, the local bourse had procured the present system through global competitive bidding at a total cost of Rs 31.1 million, and that Nepse had now selected YCO to develop the fully automated online trading system at a total cost of Rs 200 million. As the tussle between Nepse and SEBON dragged on, YCO Pvt Ltd filed a lawsuit at Patan High Court, which has yet to issue a verdict.

The communication between the two parties point towards the fact that Nepse is sticking to its decision to procure software from the local vendor. Nepse has repeatedly corresponded with SEBON on the pros and cons of international bidding rather than abiding by SEBON’s instruction.

Organising a press conference today, Nepse has released all the letters exchanged between the two institutions regarding the tussle. Nepse has claimed in its letter to SEBON that the regulator too was involved while formulating the terms of reference for the online trading system and had a representative during the meeting.

Through this letter it can be understood that Nepse is trying to point a finger at SEBON for the delay in introducing the internet-based fully automated online trading system, but SEBON has categorically denied such claims in its response.