NEPSE asked to bar orders through AI-based technologies

Kathmandu, Aug. 25

The Securities Board of Nepal (SEBON) has directed the Nepal Stock Exchange (NEPSE) to identify and prevent orders placed using the technology based on Artificial Intelligence (AI) within the Trade Management System (TMS).

"Until further arrangements are made, implement measures across all TMS platforms connected to the trading system to identify and prevent orders placed using AI-based technologies," SEBON directed while also asking NEPSE to publish a notice to inform investors accordingly.

However, it also asked NEPSE to conduct a study for enabling trading through AI-based technologies within the TMS.

In its 19-ioint directives issued to NEPSE on Tuesday, the capital market regulator asked to conduct a study and submit a report regarding international practices, Nepal's requirements, NEPSE's infrastructure, and the necessary legal and other arrangements for enabling trading through the AI-based technologies.

Likewise, the Stock Exchange should address the recurring technical issues in the NEPSE Online Trading System (NOTS) by identifying the problems, enhancing and modernising the trading system to facilitate the trading of new instruments, and ensuring a secure trading system.

Stating that it received complaints from investors regarding the TMS used in securities trading, the SEBON directed NEPSE to conduct an IT Audit or Vulnerability assessment and penetration testing (VAPT) of the systems approved by it and submit a report.

The stock exchange is also directed to make the necessary arrangements to enable secondary market securities trading through a mobile application, and arrange for Centralised Know Your Customer (C-KYC) to be usable when opening TMS accounts for securities trading.

Currently the C-KYC is operated by the CDS and Clearing Limited.

Similarly, the Board asked NEPSE to conduct a study and recommend legal and procedural reforms regarding listed companies that have remained inactive in trading for an extended period.

"Develop and roll out the data.nepalstock.com portal to streamline the dissemination of official information from listed corporate entities," it said. "Ensure effective implementation of the arrangement for releasing funds to clients within the T+2 (within two business days) settlement period for securities trading."

 

'Study circuit breaker rule'

In addition, NEPSE is given a week to submit a study with recommendations to the Board on whether the existing circuit breaker rule of allowing up to a 15 per cent daily fluctuation in secondary market trading of listed companies requires a review.

The recommendations should also tell whether the method of calculating the NEPSE Index based on the trading during the final 15 minutes of a trading session, which was previously implemented per Board directives and then suspended, can be resumed.

Management of Market Orders (MKT) occurring towards the close of trading hours is another area where the SEBON has sought suggestions from the NEPSE.

Other directives to NEPSE include ensuring uninterrupted availability of the official demo trading platform, effectively implement and enforce After Market Orders, and make classification process for listed companies objectives based on their financial strength, liquidity, and state of corporate governance.

 

Maintain separate bank accounts

Meanwhile, the SEBON asked the brokerage firms to handle the securities business operations and fund deposited for securities transactions through separate bank accounts. "Although provisions require maintaining separate and distinct records so that accounts related to each client's securities transactions are clearly visible, inspections by the Board revealed that stockbroker firms were operating all funds through a single bank account," read the directive.

Likewise, it issued directives to the merchant bankers to submit the applications for the issuance of securities to the Board only after conducting an objective study to ensure the financial and managerial aspects of the issuing company, as well as the absence of any conflict of interest.

Published in The Rising Nepal on 26 August 2026.