Kathmandu. The Securities Board of Nepal (SEBON) has sought opinions and suggestions on the preliminary draft of the regulations prepared for the operation of intraday securities trading.

The board has prepared the preliminary draft of the ‘Inter-day Securities Trading Regulations, 2083’ with the objective of making the speed of transactions, liquidity and pricing process more effective in the capital market of Nepal.

The Board has prepared the draft of the regulations based on the ‘Concept Paper on Implementation of Inter-day Transaction of Securities in Nepal, 2083’ published on September 22, 2083.

According to the proposed draft, stock exchanges and securities brokers will have to get approval from the board to conduct inter-day trading. In addition, only listed securities that meet the prescribed criteria will be considered eligible for such transactions.

The draft regulation states that securities brokers should provide the facility of inter-day trading only after assessing the customer’s identity, financial capacity, risk tolerance and suitability. It has also been proposed to examine the client’s order, margin, risk limit and other necessary conditions before conducting the transaction.

Likewise, necessary technical systems, security arrangements and real-time risk control systems should be maintained for inter-day transactions.

According to the proposed provision, an investor will have to close the open position created by buying or selling any securities under the inter-day trading within the same day. It has also been proposed that if the open position is not closed within the stipulated time, it will be automatically closed (auto square off).

Every customer doing inter-day transactions will have to maintain the margin as prescribed. The draft also provides that additional margin i.e. variation margin can be determined based on the fluctuations of the market.

Similarly, it has been proposed to set a maximum exposure limit for each customer, securities dealer, securities and the overall market. Securities brokers will have to provide for risk management, internal control and complaint management system.

The draft has also made it mandatory for the board, stock market and securities brokers to conduct an inter-day investor education and awareness programme.

The board has also proposed to implement the inter-day securities trading in a phased manner as per the need.