Wednesday, August 12, 2020

Nepse issues procedures for operation of stock dealer

 Kathmandu, Aug 11

Nepal Stock Exchange Limited (NEPSE) has issued procedures for the operation of stock dealer.

The Stock dealer Operation Procedure, 2020 will come into effect from coming Monday, August 17, as the Board of Directors of the NEPSE decided.

A stock dealer is the business entity that buys and sells the securities in the share market on its own account. It is different from the share broker as it buys and sells the shares on behalf of the investors while the dealer business is to conduct it as a part of its business.

It helps to stabilise the share market and maintain the liquidity by buying the securities while the price goes unexpectedly down and selling at the time of market inflation.

NEPSE has barred the stock dealer to involve in the transaction of smaller companies listed. It will create a list of the companies for the dealer to transact, and the list will be updated every year.

The dealer can select the company to buy the securities if the latter is in profit for the past three years, has at least 10,000 investors and more than Rs. 200 million paid up capital, and has share transaction at least 80 per cent days of the business days.

It has to select the companies that it wants to buy the shares of and can transact the securities with the approval of the NEPSE.

The procedure has set the minimum limit of securities that a dealer can transact at 1000 units. It can buy or sell 10,000 to 50,000 units of shares as per the paid-up capital of the company. Fifty thousand units of shares of a company that has Rs. 8 billion or more paid up capital can be bought.

Likewise, the dealer can buy 40,000 units of shares of a company having paid up capital Rs. 5 billion to Rs. 8 billion, 30,000 units of a company with Rs. 2 billion to Rs. 5 billion paid up capital.

About 25,000 and 20,000 units of shares could be bought of the companies having paid up capital of Rs. 1 billion to Rs. 2 billion, and Rs. 500 million to Rs. 1 billion respectively.

Only 10,000 units of shares can be bought of the company that has paid up capital from Rs. 200 million to Rs. 500 million.

A dealer cannot buy or sell shares that amount more than 60 per cent of its net worth in a day. It has to maintain a bank or cash guarantee of Rs. 5 million at the NEPSE before starting to work as a dealer.

Citizen Investment Trust has already announced that it would begin to work as a stock dealer from the next Nepali month of Bhadra. NEPSE has formulated the procedures to regulate the stock dealers with a hope that more companies will join the CIT's initiation.

 Published in The Rising Nepal daily on 12 August 2020. 

 

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