CDS Regulation draft fixes bottomline for Central Depository Company

The draft Central Depository System Regulation-2066 has fixed the minimum paid-up capital for the Central Depository Company (CDC) at Rs 300 million.
"The party interested in establishing a Central Depository Company (CDC) also has to submit a three-year business plan and operation manual, according to the draft.
Securities Board of Nepal (Sebon) has drafted the Central Depository System Regulation-2066 for the establishment and operation of the CDC. The regulatory authority of the capital market has also sought suggestions on the draft regulation.
Central Depository System (CDS) is an Electronic Book Entry System to record and maintain securities and register their transfer. "The interested party should have commensurate infrastructure," the draft reads. In CDS, ownership will be changed without physical movement of securities or execution of transfer deeds. Ownership will be transferred as soon as securities move from one account to another as it is purely a settlement vehicle and will not affect trading in any manner whatsoever.
Central Depository System (CDS) will bring tremendous efficiency and growth in the domestic capital market, but time is running short as in the Budget speech for the fiscal year 2009-10, Finance Minister Surendra Pandey has already announced that CDS will start operating by October 17.
"The Nepal Stock Exchange (Nepse), Citizen Investment Trust (CIT) and banks -- that are in operation for last five years, networth not less than paid-up capital and earning profits for the last three years -- can be the shareholders of the CDC. "But they should not have been blacklisted by the Credit Information Bureau (CIB)," says the draft.
The shareholders also have the lock-in period of five years.
Earlier, a group of banks, Nepal Stock Exchange (Nepse), Citizen Investment Trust (CIT) and Credit Information Bureau (CIB) have shown keen interest in establishing Central Depository Company.
The Central Depository Company of Nepal -- that they have envisioned -- will have 50 per cent shares of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 per cent of a group of six promoter cum commercial banks -- Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank.
The increase in volume and number of share transactions after the automation of Nepse has created the demand for the establishment of CDS that offers safety and convenience compared to holding securities in physical form. It also enhances liquidity by instantaneous transfers and delays, thefts, interceptions and subsequent misuse of certificates eliminated.