Sebon mulls over licensing a new stock exchange

The government is planning to give licence to a new stock exchange before the election.

The Securities Board of Nepal (Sebon) has approved the amendment to the Securities Market Operation Regulations 2007 last week and sent it to the Finance Ministry for ‘further processes’. The ministry will then present it to the cabinet for final approval. The government is in haste to give licence to a new stock exchange as the election is nearing, and many smell huge money behind it.

The amendment to the Securities Markets Regulations 2007 has increased the paid-up capital by 6 times to Rs 3 billion from the existing Rs 50 million, the board confirmed, adding that other institutional investors, except the banks and financial institutions (BFIs), can also invest in the new exchange. At present, only banks, financial institutions, securities traders and listed organisations can invest in shares of the stock exchange. “Any private and public limited company can invest in the new stock exchange company that will be a complete private entity,” the amendment reads.

Likewise, the investor can hold up to 15 per cent of the shares in the new stock exchange, unlike the current rule of 10 per cent, according to the amendment. Investors can hold up to 15 per cent stakes in banks and financial institutions, and also insurance company. “Thus, the board has followed the banking and insurance regulator,” justified the board. However, an individual investor cannot invest.

There are two schools of thought on necessity new stock exchange; for a small market like Nepal. One claims that there is no need of another stock exchange, and the other claims that private stock exchange can make the current Nepal Stock Exchange (Nepse) more competitive.

Some business groups are lobbying for a new stock exchange, whereas the government has long been planning, without success, to divest its stakes in Nepse and make it a complete private entity. And providing licence for a new stock exchange before election also raises eye brows. Today, addressing a programme in Kathmandu, CPN Maoist (Centre) chair Puspa Kamal Dahal ‘Prachanda’ said that his party needs money to win election, and the capitalists has money.

“That’s why the controversial Janardan Sharma has been reappointed as finance minister for the second time, giving a clearance from the parliamentary probe committee after the CCTV scam on the night of budget,” informed a source at the Finance Ministry. “The purpose of giving clearance to Sharma and reappointment as finance minister will be seen in the days to come,” the source added.

The board, however, cites an expanding volume of the stock trading recently, and stakeholders demand to give license to a new stock exchange.

Currently, there is only one stock exchange, Nepal Stock Exchange (Nepse), where securities like stocks and bonds are traded. The Nepal Stock Exchange (Nepse) – also the front line regulator of securities trading in the country – has 58.66 per cent stake of the government, 14.60 er cent stake of Nepal Rastra Bank (NRB), 10 per cent stake of Employees Provident Fund (EPF), and 6.14 per cent of Rastriya Banijya Bank (RBB).