SEBON authorised to issue license of a new stock exchange

 Kathmandu, Apr. 9

The Securities Board of Nepal (SEBON) can now issue license to the new capital market players including a new stock exchange, commodity exchange and new share broker companies.

The capital market regulator has now permission to exercise its authority to open licenses as the Supreme Court on Sunday canceled  a writ filed by advocate Dipak Bikram Mishra demanding the stopping of the process to open new stock exchange and add brokers. A joint bench of Justices Anil Kumar Sinha and Sushma Lata Mathema had listened to the petition on Sunday and cancelled all the writs challenging the SEBON's move.

The SEBON had announced to issue license to a new stock exchange, commodity exchange and broker company on September 18, 2022 but had to halt the entire process as the case was filed at the Supreme Court on October 21 last year.

Earlier on September 21 last year, Justice Til Prasad Shrestha had issued an interim ruling to halt the process to open new companies in the capital market sector.

The capital market regulator had amended the Securities Market Operation Regulations-2008 and the Securities Dealers Regulations-2008, in order to initiate the process of issuing licenses.

Following the amendment it had published a notice with a 30-days deadline to apply for the license of the stock and commodity exchanges and stock brokers. According to the SEBON, 46 companies – including existing one - had filed applications for stock broker's licenses, and one application was registered for stock exchange license.

Following the court decision, SEBON said that it would make the next move according to the decision of its board.

As per the amended regulations, a fully operational stock broker company should have Rs. 600 million paid up capital while limited trading broker should have Rs. 200 million capital. Likewise, the stock exchange company is required to maintain paid up capital of Rs. 3 billion.

However, the stakeholders' views are divided on opening a new stock exchange. Currently, Nepal Stock Exchange (NEPSE) is the sole share market platform for the trading of securities.

The SEBON had opened the license for the new stock exchange about 14 years ago when it had received four applications for Nepal Securities and Derivative Exchange, Kathmandu Stock Exchange, National Stock Exchange and Himalayan Stock Exchange.

Former chairmen Dr. Surbir Paudyal had opened applications for the license of a new exchange then. His successor Dr. Rewat Bahadur Karki had also tried to move the process forward but he could not make much progress amidst growing controversy and increased interest of large business houses in the country to invest in the exchange.

Currently, Nepal has one stock exchange and 50 stock brokers but has no commodity exchanges. Likewise, it has one clearing company, three credit rating companies, 19 mutual funds, one stock dealer and 234 listed companies.

According to the NEPSE, about 4.36 million Mero Share accounts, and 5.26 million demat accounts have been opened in the country. Meanwhile, 2.7 million people have participated in the initial public offerings of various companies in the current fiscal year 2022/23. 

Published in The Rising Nepal daily on 10 April 2023.