SEBON finalising commodity regulations

Kathmandu, October 8

The Securities Board of Nepal (SEBON) has been preparing to finalise the commodity exchange regulations. After the Legislature-Parliament had endorsed the Commodities Exchange Market Act 2017 on July 31, SEBON began preparing to finalise the regulations to implement the newly formed law.

“We are in the final stage of preparing the regulations and as soon as we finish it we will forward it to the Ministry of Finance,” said Niraj Giri, executive director of SEBON. According to a provision of the act, it has to be implemented 90 days after it is authenticated by the president. President Bidhya Devi Bhandari had authenticated the act on August 27, which means SEBON has to implement the act from November 27.

“The regulations will simplify the provisions of the act and create a base to fully implement the new law in the country,” Giri said. “The law will bring the unregulated commodity market under the supervision of SEBON, which will offer greater transparency in the trading process of the commodity exchange.”

Giri said that SEBON will prepare all the necessary rules for the proper implementation of the act. Similarly, the act also has a separate provision for the brokers of the commodity exchange market. He also said that the finance ministry will endorse the regulations within the set deadline.

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

Before the parliament endorsed the act, there was no legal provision to regulate the commodity market in the country. In the existing Securities Act 2007, SEBON is authorised to regulate the capital market only, which means the secondary market and it does not mention anything about the commodities market.

As per the new act, SEBON will issue operating licence to those companies that are interested in commodities exchange, trading, payment and settlement, and operating warehouses. Giri further informed that the act has set a minimum paid-up capital of Rs 500 million for the establishment of a commodity exchange company.

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 the 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. According to a provision of the law, commodities exchange companies can also opt for merger or acquisition process.