Wide Reforms Proposed in Stock Exchange

Nepal Stock Exchange Ltd. (NEPSE) has unveiled an ambitious programme to bring about a number of reforms.

According to a press release from NEPSE, the transaction in the trading floor will be computerized beginning mid-August under a Local Area Network (LAN) technology and the same will be expanded this year to Wide Area Network (WAN). With this, it will be possible for transaction from the offices of the member brokers. That is to be followed by development of client support software needed for fully internet-based transaction. This will enable the investors to key in their sales or purchase orders from any location in the world.

In this connection, NEPSE has also announced a programme to develop the Central Depository System (CDS) needed for paperless transaction.

Moreover, NEPSE is going to calculate and publish new NEPSE index based on freely floating shares replacing the existing index which is based on the total number of scrips listed. The need for the new index was being felt for a long period as the existing index fails to measure the market momentum since almost 70 percent of the listed shares are owned by the promoters of the companies and they are not available for trade in the market.

In another important announcement, NEPSE has promised to start derivatives market this year beginning with trading on the ‘right’ to buy right shares issued by the companies. However, the NEPSE press release is silent about when trading on derivatives like futures and options are to start.

Similarly, NEPSE has also promised to start over-the-counter (OTC) market from this year itself for trading on the securities that are delisted from the stock exchange or are not eligible to be listed.

In another proposed reform, NEPSE is going to create necessary infrastructure to allow non-resident Nepalis and foreign institutional investors to invest in the secondary market.

Likewise, NEPSE is also going to recommend for increase in the number of licenced brokers as after the floor automation, there will be a space to accommodate 50 brokers. After the implementation of WAN technology, it will be possible to allow open entry and open exit to the brokers, says the press release.