Wednesday, October 6, 2010

Sebon approves CDS Regulations

The Securities Board of Nepal (Sebon) has approved the Central Depository of Securities Regulation-2010 that paves the way for setting up of Central Depository System (CDS) Company.
“The implementation of CDS will do a great deal in encouraging investors as there will be hassle-free and swift ownership transfer and instant liquidity,” said Niraj Giri, Director at the Sebon.
The CDS is a clearing and settlement system being used in stock exchanges. Under the CDS, the current practice of holding and moving the scrip of quoted shares physically will be replaced by a safe and dependable computerised book entry system. All the physical scrips of the companies listed on the stock exchange will be recorded electronically, and investors will have CDS accounts which will show their holdings, the seller’s account will be debited and the buyer’s account will be credited when shares are traded.
Nepse owns 51 per cent stake in the CDS Company that is in the offing, the rest of the stake will belong to 13 commercial banks and Citizen Investment Trust, according to Nepse.
The company is being established with the technical assistance of Central Depository Services India Ltd. At present software for the system is being developed by Tata Consultancy Services.
"The company might start the operation in next four months if all goes well," Giri added.
"After the operation of CDS, a single share can be transferred multiple times that will increase the volume of transaction which might boost the investors' confidence," said Shanker Man Singh, General Manager of Nepse.
CDS offers safety and convenience compared to holding securities in physical form, enhances liquidity by instantaneous transfers and eliminates instances of delays, thefts, interceptions and subsequent misuse of certificates. The implementation of CDS is supposed to be able to wipe out inconsistency and manipulation in stock trading, making the Nepali capital market more transparent. CDS is expected to reduce discrepancies as well.

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