Nepse to issue brokerage licences for provinces

The Nepal Stock Exchange (Nepse) is planning to issue licences to new brokerage firms that would allow them to operate their business at the provincial level.
Replying the capital market regulator, the front line regulator said it will invite interested companies to operate brokerages at each of the country’s seven provinces after its preparation.
The Securities Board of Nepal (Sebon) had directed the Nepse and CDS and Clearing last week to report on the progress of implementation of its policies related to licencing. The policies – based on the 58-point recommendations made by the Finance Ministry last December – was expected to ensure better transparency in the secondary market, and address its multiple structural and operational issues.
The regulator has also reminded Nepse that it has missed out on providing banks with brokerage licences, appointment of market dealers and reducing the number of days for transaction settlement. The regulator also said that the establishment of an investors’ protection fund by Nepse is still pending.
The stockbrokers are, however not sure, if the licences allowing new brokerages to operate in the provinces would help their business. “The existing brokers have been operating from the provinces through a number of remote workstations which haven’t yielded good earnings,” according to a broker, who has started office in one of the provincial capitals.
Nepse – in 2017 – had allowed 50 brokerage companies operating in Kathmandu to open their branch offices outside the Kathmandu Valley and operating via remote workstations. According to Nepse, a total of 56 such remote work stations have come into operations. These are mainly based in Biratnagar, Birgunj, Dharan, Pokhara, Narayanghat, Itahari, Nepalgunj, Butwal, Dharan, Pokhara and Dhangadhi.
According to the Nepse, the domestic stock market registered stock trading worth Rs 110 billion in 2018-19, of which most remote workstations earn Rs 500,000 to Rs 600,000 on average in a trading day. “Based on the broker’s commission of 0.6 per cent at present, a single workstation earns a daily average income of Rs 4,000,” they said, adding that out of the income, brokers need to pay 15 per cent in income tax and 20 per cent as fees for Nepse and Sebon, following which only a tiny amount is left for the brokerage firm. The leftover amount is hardly enough to cover the expenses of four employees and office rent.

Nepse starts process of awarding broker licence to banks

Nepal Stock Exchange (Nepse) and CDS and Clearing Ltd (CDSC) have started to homework to provide brokers licence to commercial banks after receiving the direction from the capital market regulatory authority. 
On July 15, Securities Board of Nepal (Sebon) has directed Nepse to provide broker licence to the banks’ subsidiary companies according to the recommendation of a team of experts that was formed by Finance Ministry last year. Last December, a team of experts led by central bank deputy governor Shiva Raj Shrestha had suggested the board that banks should be allowed to establish subsidiary brokerage firms. Following the suggestion from the central bank, the capital market regulator carried out a study to implement the recommendation. The Nepse has also the started the homework to provide the brokers licence to the commercial banks.
The Sebon has also directed Nepse to conduct a study on ways to make stock market circuit breaker more contextual.
According to Sebon, before issuing the broker licence, Nepse needs to determine the number of subsidiary companies of commercial banks, minimum capital of such firms, necessary human resources, physical infrastructure, and their number of branches across the country. Nepse and commercial banks will have to jointly determine financial feasibility before its establishment outside the Valley.

Online trading faces technical glitches on the first day

Though Nepal Stock Exchange (Nepse) started the online trading today, the system could not show the transaction due to technical glitch. 
Nepse chief executive officer Chandra Saud, however, claimed that the new system has been built as per the 'international standard', the investors and brokers said that they encountered technical glitches, while trading securities on the first day of the full-fledged implementation of the Nepse Online Trading System (NOTS).
Former president of Stock Brokers Association of Nepal (SBAN) Priya Raj Regmi said that the brokers faced technical errors in the new trading process. "The system cancelled some tradings saying insufficient fund," he said, adding that they were also unable to edit the order process that requires investors to start new order process. "We failed to get floor sheet for individual investor also."
According to the investors, they could not see trading data on Nepse's website like before. The website shows green – means the Nepse gained – and closed the market at 1,218 points but the market was closed at 1,219 points, yesterday. The wrong information has completed confused the investors, though Nepse claimed that the issues has nothing to do with the new online trading system. The Nepse claimed that it gained 11 points today. In that case the market has to close at 1,230 points, but the website shows closing at 1218 points with 11 points gain.

Stock transaction to resume on Sunday

Stocks transaction – which could not take place on Thursday in the secondary market due to high-headedness of share brokers – is going to resume on Sunday, according to the brokers.
The stockbrokers launching a protest to condemn the government’s decision to bring in stockbrokers to value added tax (VAT) regime had closed the market on Thursday 'forcefully' as the capital market regulators – Securities Board of Nepal (SEBON) and front line regulator Nepal Stock Exchange (Nepse) – both remained mute spectators.
"We have agreed to open the transaction on Sunday after the talks with Finance Ministry officials on Friday," said chairman of Stockbrokers’ Association of Nepal (SBAN) Priya raj Regmi after the emergency meeting of the brokers today.
Stockbrokers had completely halted share transactions on Thursday – hurting the investors' sentiment and against the market norms – after the Inland Revenue Offices (IROs) directed two stock brokerages to clear the due VAT levied on commission amounts of the last four years.
The IROs on Wednesday sent letters to Investment Management asking to clear dues of Rs 15 million. Likewise, it also wrote Sundhara Securities asking to submit VAT amount of Rs 6 million. The IROs’ move took brokerage companies by surprise as VAT was never levied on commission generated by stockbrokers before. However, it is not known why the IROs wrote only 2, out of the total 50 broker firms.
The stockbrokers – showing their disagreement – had declined to take purchase and sale orders from the investors on Thursday in a 'syndicate' decision.
Revenue secretary Shishir Dhungana summoned the brokers yesterday – a day after they launched the protest – to discuss on their grievances.
The Finance Ministry has however said that it would not roll back its decision to slap VAT on commission generated by stockbrokers, though it is ready to revise the due amount of the last four years. "The ministry has agreed to find out an alternative to recover the VAT of last four years," the Finance Ministry added.

Broker commission slashed by almost half

The capital market regulator has nearly halved brokerage commission for trading of share and securities in the stock market. It has reduced the brokerage commission on share and bond transaction by maximum of 40 per cent.
According to the Securities Board of Nepal (Sebon), stockbrokers will now charge a maximum of 0.60 per cent and minimum of 0.40 per cent service fee. Earlier, they used to charge from minimum 0.7 per cent to maximum 1 per cent commission on transaction of shares and bonds.
The brokerage commission for transaction of shares up to Rs 50,000 has been brought down to 0.6 per cent from existing 1 per cent. Likewise, commission for transaction between Rs 50,000 and Rs 500,000 have been reduced to 0.55 percent from current 0.9 percent.
The brokerage will charge 0.60 per cent on sales or purchase of shares of up to Rs 50,000 in value, the board said, adding that the stockbrokers cannot charge service fee of over 0.55 per cent of the transaction value on sales or purchase of shares worth over Rs 50,000 to up to Rs 500,000. "Earlier, the brokerage used to charge 0.9 per cent commission of the transaction value worth over Rs 50,000 to up to Rs 500,000."
The service fee for sales or purchase of shares worth over Rs 500,000 to up to Rs 2 million has been fixed at 0.50 per cent of the transaction value, while service fee for sales or purchase of shares worth over Rs 2 million to up to Rs 10 million has been fixed at 0.45 per cent of the transaction value. The service fee for sales or purchase of shares worth over Rs 10 million has been fixed at 0.40 per cent of the transaction value.
Amending the Securities Businessperson (Stock Broker, Securities Dealer and Market Maker) Regulations 2008, Sebon had presented the proposal to the ministry for approval some 18 months ago. The Finance Ministry has today approved the amendments proposed by the Securities board.
After getting approval from the ministry, the Sebon has directed Nepal Stock Exchange (Nepse) to bring the new fees into immediate effect. However, the new rates will come into effect only after Nepse enforces it.
The decision to bring down brokerage charges has come in the wake of complaints from the investors that such commission was the highest in South Asia. Though decline in commission reduces brokerage's income directly, the lower commission rate will increase transactions and attract new investors which can counterbalance our revenue.
The board has also revised service fees on transaction of securities other than shares issued by companies and sovereign bonds issued by central bank or other government agencies. The service fee has been revised downwards to 0.30 per cent of the transaction amount on sales and purchase of such securities worth up to Rs 500,000. If the transaction amount of such securities stands at over Rs 500,000 to up to Rs 5 million, then service fee cannot exceed 0.25 per cent of the transaction amount, the board added. "If transaction value of such securities stands at over Rs 5 million, then the service fee of 0.20 per cent of the transaction amount should be imposed."
"The rates had not been reviewed for the last eight years," chairman of Sebon Rewat Bahadur Karki said, adding that implementation of automated trading system has nearly doubled turnover in recent days. "We decided to review the rates and bring it down so that the transaction costs become cheaper."
The board also decided to reduce the rate to encourage investors to come to the market and provide more liquidity," he added.
The investors have welcomed the move, saying that it will provide additional financial incentive for trading, and the trading will see increment in the days to come.

Share market likely to open from May 24

Instead of tomorrow, the share market is going to start trading from May24.
The market has been closed since April 26 after the devastating 7.8-magnitude earthquake of April 25. And it had initially planned to start trading from tomorrow. But the market lost confidence after another earthquake of 7.3-magnitude, according to USGS, on May 12. The market is closed - for the first time in its history - since April 26.
However, Nepal Stock Exchange (Nepse) is yet to inform its regulator, Securities Board of Nepal (Sebon), according to general manager of Nepse Sitaram Thapaliya.
The Nepse has not officially notified the public, but the marker cannot open tomorrow, he said, adding that it would not be possible to resume trading from Sunday according to earlier plan due to Registrar to Shares, brokerage companies, Central Depository System and Clearing Ltd and investors are shaken after the May 12 earthquake.
Nepse will remain closed next week also due to pressure from some big investors and the brokerage companies. The share market was closed after the April 25 earthquake as some of the brokerage firms and Registrar to Shares (RTS) suffered huge damage, apart from Central Depository System (CDS) and Clearing Ltd, that was worst hit.
Though, some of the stakeholders proposed the market to open partially – during today's meeting – most of the stakeholders sought for few more days to calm the nerves of the shaken investors. "The market has lost confidence after the May 12 earthquake," they said, suggesting Nepse to open trading for an hour Sunday, and gradually increase its trading hour to normal. But Thapaliya said that the Nepse cannot open for only one hour. "Either the trading hours will be normal or the market will remain closed for the time being," he added.
The market operates for three hours from 12 to 3 five days a week from Sunday to Thursday.
Some of the Registrar to Shares including Civil Capital, Siddhartha Capital, NMB Capital and Growmore Merchant Banker have asked for an additional period of one week to set up their offices damaged by the earthquakes. Similarly, CDS and Clearing Ltd has also sought time to shift its office to Nepse premises in Bhadrakali from the current building that has been damaged badly.
The share market that is going to open after a month from the earthquake of April 25 is expected to see a selling pressure due to investors' need of cash and also lost confidence.

This week too, Global Bank rules Nepse roost

Global Bank dominated in Nepse the second consecutive week as it topped the chart in terms of share units traded, trading amount and number of transactions with 42,000-unit shares through 663 transactions at Rs 25.29 million.
However, the major sub-groups plunged to drag Nepse down by 5.69 points to close weekly trading at 657.02 points from last week's closing of 662.71 points. Of the nine-sub groups' indices, only one sub-group -- hotels -- rose to a marginal 1.45 points to reach 363.11 points from last week's closing of 361.66 points.
The other seven sub-groups -- except trading that remained constant due to no transaction of its shares -- lost due to low investors confidence though the transaction amount increased by 73.75 per cent to rise to Rs 218.2 million against last week's transaction of Rs 123.5 million, according to Nepse.
The 78-scrip sensitive index -- considered blue chip shares in the domestic market -- also lost 0.65 point to drop to 176.01 points from last week's closing of 176.66 points. The float index -- calculated on the basis of real transactions -- also lost 0.32 point to dip to 64.39 points from last week's closing of 64.71 points.This week witnessed five-day trading as against last week's three-day trading, but Nepse gained only on one day.
The week started in the red as on Sunday Nepse shed 2.76 points to drop to 659.95 points from last week's closing of 662.71 points. However, Monday witnessed a marginal gain of 0.06 points to raise it to 660.01 points. Nepse continued to lose on the remaining days -- Tuesday, Wednesday and Thursday -- and closed weekly trading at 657.02 points.
This week's top performers were Global Bank (with Rs 25.29 million), Standard Chartered Bank Nepal (with Rs 21.93 million), Bank of Kathmandu (with Rs 16.86 million), Nepal Development and Employment Promotion Bank (with Rs 10.96 million) and Gurkha Development Bank (with Rs 10.15 million).
The development banks' sub-group shed 13.48 points and dropped to 829.03 points whereas commercial banks' sub-group lost only 2.34 points and dropped to 662.38 points. The finance companies' sub-group lost 5.15 points and dropped to 756.20 points and the insurance companies' sub-group fell by 5.88 points to 651.59 points.
The manufacturing sub-group went down by 0.77 point to 433.28 points and the hydropower sub-group downed by 4.09 points to 860.36 points. The highest loser was the others' sub-group that went down by 18.79 points to 599.21 points.
The sole secondary market this week also listed over one million-unit of bonus and rights shares of six financial institutions.

Brokers' exam guide
KATHMANDU: Securities Research Centre and Services (SRCS) has brought out a book -- Share Broker Licence liney ke garnu parchha (How can one get share broker's licence) in the market.
The publication of the book might be called ill-timed as Nepal Stock Exchange (Nepse) is still in legal consultation due to confusion over the brokers' exam. However, the book is useful as the SRCS has compiled all the regulations, the procedure of brokers' selection and model questions for the exam.
For a long time -- almost two decades -- Nepse ruled the capital market as the sole secondary market. Now, however, the increasing number of listed companies and investors but few brokers have marred the growth of the capital market.
The market size has increased seven-fold and the number of investors has crossed 1.5 million but the number of brokers has dropped to 23 from the initial 32. More brokers will not only make the it easy for investors' share trading but also create jobs as one broker has to have atleast five employees.
"The number of brokers can be increased but there is a legal hurdle," said Shankar Man Singh, managing director of Nepse. The CIAA has directed Nepse to halt the process of adding new brokers whereas the Supreme Court has given the go-ahead. "The contradictory decision of the two institutions has created confusion," he said adding that Nepse is consultating lawers for a way out.
If Nepse decides to enlist more brokers, the book could well become a hot potato.

Govt seeks list of promoter share traders

The government has asked Nepal Stock Exchange (Nepse) to provide it the list of traders of promoters shares in the recent months.
"The move is liekly to shake the already eroding confidence of investors," said an investor. The sole secondary market permitted the trading of promoters shares on the Nepse floor last March.
Earlier, the government asked for a list of investors trading over Rs 5 million annually which had pulled Nepse down.
Meanwhile, Nepse again also lost 2.2 points to drop to 636.31 points. Yesterday, it lost 20.38 points to fall to 638.51 points.
The year on year (y-o-y) Nepse index decreased by 28.4 per cent to 734.85 points during mid-December 2008. This index was 1025.91 a year ago. The Float Index -- calculated on the basis of real transactions -- as of August 24, 2008 at market prices, remained at 69.45 during mid-December 2008, according to Nepal Rastra Bank's report
However, the total number of companies listed with Nepse increased to 145 in mid-December 2008 compared to that of 142 a year ago.

Broker suspended
KATHMANDU: Nepal Investment and Securities Trading Pvt Ltd,a brokering firm, has been temporarily suspended until further notice. According to the Securities Board of Nepal (Sebon), the regulatory authority of the capital market, the promoters of the firm have a stake in another brokering firm Trishul Securities and Investment Ltd also. This, according to the Securities Act 2063, is illegal.

Capital market comes of age

"Capital market has entered into a new era," said Dr Chiranjibi Nepal, chairman of Securities Board of Nepal (SEBON), the regulatory authority of the capital market in Nepal addressing a press meet here in the valley Wednesday.
"Capital market needs transparency and effective regulation to develop it as a vibrant economic driver," he said adding that technological advancement and modernisation can only help it develop.
SEBON has on Sunday brought the long-awaited three regulations — Securities Board Regulation-2064, Stock Exchange Licensing Regulation-2064 and Securities Businessperson Regulation-2064, according to the Securities Act 2063, (clause 116).
The Stock Exchange Licensing Regulation-2064 has provisions that Nepse can now invite applications for new brokers. In Nepal Stock Exchange's (Nepse) recommendation SEBON will give licence to the new brokers. However, the existing brokers also have to take new license to improve their competence and quality at par with the new brokers, according to the new regulation.
The small investors will benefit from this as there will be more brokers and they can cater to the needs of all the investors. To make the brokers more deciplined, professional and check fake investors, the regulation has also provisions that they must keep records of proper identification of their clients.
The regulation — has already come into effect from Monday — has also reduced brokers' commission to maximum one per cent to 0.7 per cent. Earlier brokers used to charge 1.5 per cent to one per cent.
Though, it is too soon to expect any one to come forward for new stock exchange, the new regulation has paved the way for new stock exchange also. It has however, laid emphasis on sound infrastructure and investors' reputation.
"The new regulation will help professionalise the market, market -makers and brokers," said Nepal adding that SEBON can now act like a real regulator as the Securities Board Regulation has given it right to investigate and punish the wrong-doers.
It will also get 0.015 per cent of every transaction; from both buying and selling. The Nepse will collect the amount and give to SEBON every month, states the regulation.
Parista N Poudyal, director of the Marketing Regulation Department at SEBON did the presentation on the regulations while chief of SEBON Nepal replied the questions raised by the media at the press meet. Nepal also informed that SEBON is bringing IPO Registration regulation and planning more investors awareness programme throughout the country.

Brokers' commission reduced

Stock brokers' commission has been reduced to one per cent to 0.7 per cent, according to the new regulation that is going to be implemented from Monday. Earlier brokers used to charge 1.5 per cent to one per cent commission depending on the amount of the transaction.
"The new regulations are more market-friendly and liberal for the investors," said Dr Chiranjibi Nepal, chairman of SEBON, the regulatory body, adding that SEBON has recommended the regulation eight months ago. "It is the best in whole South Asia," Nepal added.
"The small investors will benefit from the new regulation," Rewat Bahadur Karki, general manager and CEO of the Nepal Stock Exchange (Nepse) said adding that it will be implemented from Monday.
Similarly, SEBON will also get 0.015 per cent amount of every transaction; from both buying and selling.