As the investors have been repeatedly complaining of the highest stock brokerage commission in Nepal among South Asian countries, the capital market regulator is mulling to lower stock brokers commission.
According to the Securities Board of Nepal (Sebon), it has formed a four-member study team to revise the commission rate of brokerages to give relief to investors. “An increased trade volume on the Nepal Stock Exchange has prompted the regulator to rethink brokerage commissions,” the regulator said, adding that the implementation of a full-fledged online system has also helped reduce the administrative cost of brokerage companies substantially.
The revision in commission will help attract more investors in the secondary market, the board claimed.
Currently, the board allows brokerage companies to charge 0.4 per cent to 0.6 per cent of the total trading amount as commission. But the investors have been asking the government to lower the rate of brokers’ commissions as according to them, Nepali stock brokerage firms are charging the highest commission among the South Asian countries.
The brokers can charge 0.6 per cent commission on a trading amount of up to Rs 50,000; 0.5 per cent on the trading amount of Rs 50,000 to Rs 500,000; and 0.4 per cent if the trading amount exceeds Rs 500,000.
The capital market regulator had previously too slashed the brokerage commission. Before July 2016, the stock brokerage firms used to charge from 0.7 per cent to 1 per cent commission. The stock brokers had – following the regulator’s move – halted trading for a day to protest the lowering of the commission.
Currently, also the stock brokers seem not happy with the regulator’s move to lower the commission as according to them, the transaction volumes have shrunk due to the bearish trend in the market.
Though, the regulator has claimed that the implementation of online system has reduced the cost of operation of the brokerage firms, the brokers donot agree with the regulator. “With the implementation of the online system, stockbrokers have to bear the extra cost,” Stock Brokers Association-Nepal (SBAN) president Bharat Ranabhat said, adding that depending on transaction volume, a broker has to pay at least Rs 50,000 per month in fees for access to the data centre being operated by YCO.
Nepal Stock Exchange has launched a new platform named ‘NEPSE Online Trading System’ last November, providing direct access to individual investors and allowing them to invest in shares themselves. YCO – a vendor company – developed the online software for the Nepse. The system has replaced the traditional system of stock trading which needed a lot of paperwork but charges the brokers fee on the basis of the transaction volume.
Likewise, the stockbrokers also have to pay a levy charge to the regulator. “Out of the net profit, brokers pay 15 per cent TDS – tax deduction at source – to the government, 20 per cent to Nepse and 0.6 per cent to the board.
According to the regulator, it has started implementing the 58-point recommendations forwarded by the Finance Ministry last December. The recommendation has suggested the regulator introduce policies to ensure better transparency in the secondary market and address its multiple structural and operational issues, apart from enforcing the rule for brokerage companies to spend one per cent of their net profit on investor literacy.
According to the Securities Board of Nepal (Sebon), it has formed a four-member study team to revise the commission rate of brokerages to give relief to investors. “An increased trade volume on the Nepal Stock Exchange has prompted the regulator to rethink brokerage commissions,” the regulator said, adding that the implementation of a full-fledged online system has also helped reduce the administrative cost of brokerage companies substantially.
The revision in commission will help attract more investors in the secondary market, the board claimed.
Currently, the board allows brokerage companies to charge 0.4 per cent to 0.6 per cent of the total trading amount as commission. But the investors have been asking the government to lower the rate of brokers’ commissions as according to them, Nepali stock brokerage firms are charging the highest commission among the South Asian countries.
The brokers can charge 0.6 per cent commission on a trading amount of up to Rs 50,000; 0.5 per cent on the trading amount of Rs 50,000 to Rs 500,000; and 0.4 per cent if the trading amount exceeds Rs 500,000.
The capital market regulator had previously too slashed the brokerage commission. Before July 2016, the stock brokerage firms used to charge from 0.7 per cent to 1 per cent commission. The stock brokers had – following the regulator’s move – halted trading for a day to protest the lowering of the commission.
Currently, also the stock brokers seem not happy with the regulator’s move to lower the commission as according to them, the transaction volumes have shrunk due to the bearish trend in the market.
Though, the regulator has claimed that the implementation of online system has reduced the cost of operation of the brokerage firms, the brokers donot agree with the regulator. “With the implementation of the online system, stockbrokers have to bear the extra cost,” Stock Brokers Association-Nepal (SBAN) president Bharat Ranabhat said, adding that depending on transaction volume, a broker has to pay at least Rs 50,000 per month in fees for access to the data centre being operated by YCO.
Nepal Stock Exchange has launched a new platform named ‘NEPSE Online Trading System’ last November, providing direct access to individual investors and allowing them to invest in shares themselves. YCO – a vendor company – developed the online software for the Nepse. The system has replaced the traditional system of stock trading which needed a lot of paperwork but charges the brokers fee on the basis of the transaction volume.
Likewise, the stockbrokers also have to pay a levy charge to the regulator. “Out of the net profit, brokers pay 15 per cent TDS – tax deduction at source – to the government, 20 per cent to Nepse and 0.6 per cent to the board.
According to the regulator, it has started implementing the 58-point recommendations forwarded by the Finance Ministry last December. The recommendation has suggested the regulator introduce policies to ensure better transparency in the secondary market and address its multiple structural and operational issues, apart from enforcing the rule for brokerage companies to spend one per cent of their net profit on investor literacy.
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