NEPAL STOCK EXCHANGE LIMITED (NEPSE)

INTRODUCTION

Nepal Stock Exchange, in short NEPSE

established under the company act

operating under Securities Exchange Act, 1983.

OBJECTIVE

to impart free marketability and liquidity to the government and corporate securities by facilitating transactions in its trading floor through the member, market intermediaries, such as the broker, market makers etc. NEPSE opened its trading floor on 13th January 1994.

SHAREHOLDERS

The government of Nepal, Nepal Rastra Bank, Nepal Industrial Development Corporation and members are the shareholders of NEPSE.

HISTORY

history of securities market began with the floatation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937

Introduction of the Company Act in 1964, the first issuance of Government Bond in 1964 and the establishment of Securities Exchange Center Ltd. in 1976 were other significant development relating to capital markets.

Securities Exchange Center was established with an objective of facilitating and promoting the growth of capital markets
Before conversion into the stock exchange, it was the only capital markets institution undertaking the job of brokering, underwriting, managing public issue, market making for government bonds and other financial services.
Nepal Government, under a program initiated to reform capital markets, converted Securities Exchange Center into Nepal Stock Exchange in 1993.

MEMBERS

Members of NEPSE are permitted to act as intermediaries in buying and selling of government bonds and listed corporate securities.
there are 23 member brokers and 2 market makers, who operate on the trading floor as per the Securities Exchange Act, 1983, rules, and bye-laws.
NEPSE has also granted membership to issue and sales manager securities trader (Dealer). Issue and sales manager works as manager to the issue and underwriter for public issue of securities whereas securities trader (Dealer) works as the individual portfolio manager.
At present, there are 11 sales and issue manager and 2 dealers (Secondary market)
tenure of the membership is one year.
the license should be renewed within 3 months after the closure of the fiscal year. If not, it can be done within another three months by paying 25% penalty.

TRADING

NEPSE the only Stock Exchange in Nepal introduced fully automated screen based trading since 24th August 2007.

NEPSE trading system is called ‘NEPSE Automated Trading System ‘(NATS) is a fully automated screen based trading system, which adopts the principle of an order driven market.

MARKET TIMINGS

Trading on equities takes place on all days of the week (except Saturdays and holidays declared by exchange in advance). On Friday only odd lot trading is done.

The market timings of the equities are:-

Market Open: - 12:00 Hours

Market Close: - 15:00 Hours

Odd Lot Trading is done on Fridays. For Odd Lot Trading Market Timings are

Market Open: - 12:00 Hours

Market Close: - 13:00 Hours

Note:- exchange may, however, close the market on days other than schedule holidays or may open the market on days originally declared as holidays. The exchange may also extend, advance or reduce trading hours when it deems fit necessary.

SECURITIES AVAILABLE FOR TRADING

A. Shares

• Equity Shares

• Preference Shares

B. Debentures

C. Government Bonds

D. Mutual Funds

CIRCUIT BREAKERS

NEPSE has implemented index-based circuit breakers with effect from 2064/6/4 (21 September 2007). In addition to the circuit breakers, the price range is also applicable to individual securities.

INDEX-BASED CIRCUIT BREAKERS

the system applies at 3 stages of the NEPSE index movement of 3%, 4%, and 5%,.

These circuit breakers when triggered bring about a trading halt in all equity.

In case of 3% movement, either way, there would be a market halt for 15 minutes if the movement takes place during the first hour of trading i.e. 13:00 hours

In case this movement takes after 13:00 hours there will be no trading halt at this level and market shall continue trading.

In case of 4% movement, either way, there would be a market halt for half an hour if the movement takes place before 14:00 hours

In case this movement takes after 14:00 hours there will be no trading halt at this level and market shall continue trading.

In case of 5% movement in, either way, trading shall be halted for the remainder of the day.

PRICE RANGE

applicable to individual securities.

trading of the individual securities are not halted but allowed to trade within the price range.

The price band is 10% of the previous close in either way. *

* During the ATO session, the range is 5% in either way of Previous Close Price. After the band is 2% on either way of the Last traded price till it reaches to 10% of the previous close.

TRADING LOCATION

trading can be done either from NEPSE’s trading floor or from the broker’s office.

NEPSE uses sophisticated technology through brokers can trade remotely from their office located inside the Kathmandu valley.

This remote trading facility was started from 1 November 2007.

TRADING SYSTEM

operates on the ‘NEPSE Automated Trading System ‘(NATS), a full screen based automated trading system, which adopts the principle of an order driven market.

ORDER MATCHING RULES

system adopts the principle of the order-driven market.

the best buy order is matched with the best sell order.

An order may match partially with another order producing multiple trades.

For order matching the best buy order is the one with the highest price and the best sell order is the one with the lowest price.

SETTLEMENT

NEPSE has adopted a T+3 settlement system.
The settlement will be carried out on the basis of paper versus payment.
trading is done at "T" and at T+1; the buying brokers have to submit bank vouchers for settlement with covering letter.
At T+2, the selling brokers must submit share certificate with covering letter. At T+3, NEPSE prepares to bill for payment and this will be forwarded to the bank.
Once the settlement is done the buying brokers with the consultation of the clients must decide and present the purchased shares if they want to record it as the blank transfer. This must be completed within T+5.

BLANK TRANSFER

opportunities to derive the market benefit is provided.
buying brokers must complete the BT process within T+5.
The transactions that are executed can be recorded in a different way and NEPSE has considered all possible retention.

The followings are the major key points to be considered.

1. This is related only to the buy of the securities.

2. The buyer may decide to have market benefit either to have capital gains or to minimize the loss.

3. In order to do this s/he may partly send for name transfer or may register it in the bank transfer.

4. If s/he register total purchase in blank transfer and can put for sale and if only the part of the shares is subscribed then s/he can handover the part and the part can be forwarded for name transfer to the concerned company. In order to do this s/he has to cancel the blank transfer for that portion.

BROKERAGE

1. Brokerage for equity