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June 28, 2017

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Electronic share trading starts for first time in Nepal

For the first time in the country, electronic share trading began on Tuesday, with two stockbroker companies — Kalika Securities and Trishakti Securities — carrying out trading of 30 units of dematerialized shares of Agriculture Development Bank.

Nikesh Neupane sold his dematerialized shares through Kalika, which was purchased by Sushil Sapkota through Trishakti.

Narendra Raj Sijapati, Managing Director of Kalika Securities, said they started the paperless system of transaction also to pressure the authorities concerned to adopt a full-fledged online trading system.

Government authorities, including the CDS and Clearing Limited and Securities Board of Nepal, have to bring the entire listed companies into demat system of share trading within six months after the first transaction of dematerialized shares, according to CDS Bylaws 2012.

The government had been considering adopting an online stock trading system for the last few years. Although the Nepal Stock Exchange was established two decades ago to facilitate stock trading, there had not been any digitalized system of transaction.

The government then set up CDS four years ago to promote online clearance of stock trading. CDS had announced to start a full-fledged online clearing system by October, 2013, but failed to do so due to various reasons, including companies' reluctance to acquire licenses of clearing members (CMs) and depository participants (DPs).

Only 16 out of 235 listed companies have entered into an agreement with CDS to dematerialize their shares. So far, just 6,392 share certificates have been dematerialized, while only 10 companies have acquired the DP license.

With the launch of the paperless transaction, investors will now have to register their selling orders only after converting their share certificates into the paperless format, which can be done through DPs. Both CMs and DPs are directly linked to CDS through software, which helps settle stock transaction instantly.

Sijapati, who is also president of Nepal Stockbrokers' Association, said investors have to wait for just three days to get the ownership transferred under the online trading system. "Apart from reducing the clearance time, the paperless shares transaction system is also expected to boost stock transactions from outside the valley."

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