Kathmandu. KATHMANDU: The Securities Board of Nepal (SEBON) has issued a 19-point directive to the Nepal Stock Exchange (NEPSE) to make the transactions in the stock market stronger, more effective and credible. The Board has issued the directive in exercise of the powers given by Sub-section (10) of Section 84 of the Securities Act, 2063.

The board has also directed the NEPSE to conduct an IT audit of the system after receiving complaints from the investors regarding the Transaction Management System (TMS) used by the customers.

Likewise, the Board has directed the securities trading system (NOTS) to identify the problems seen in the system and make it more modern, efficient and safe to facilitate the transaction of new instruments.

The committee has been asked to submit a report on the international practice regarding the use of artificial intelligence (AI)-based technology in the securities trading management system, Nepal’s needs, the infrastructure of NEPSE and the necessary legal provisions. Unless further noticed, all TMS connected to the trading system have entered a transaction order using AI-based technology and to make arrangements to stop such orders and publish a notice to inform the investors.

The board has also asked the board to make arrangements for the operation of the official demo trading platform to provide technical practice of the stock market to new investors and students. Directives have been issued to effectively implement the provisions related to market price determination as per Regulation 7 of Securities Trading Operation (Fourth Amendment) Byelaw, 2082 and to make necessary arrangements to carry out secondary market transactions through mobile app.

The board has also asked the board to make necessary arrangements to implement the system under the C-Asbar system currently operated by CDS and Clearing Limited to the TMS account opened for securities trading. Keeping the NEPSE index as all index, the committee has been directed to immediately develop a new index on the basis of free float share and use it as a benchmark index. For this, the board has also been asked to submit the necessary facilitation issues.

A new index will be developed on the basis of free float shares and it will be used as a benchmark index and accordingly the rules of circuit breaker will be reviewed. It has also asked to study whether the method of calculating the NEPSE index can be resumed on the basis of the last 15 minutes of trading which was suspended as per the directive of the Board.

Likewise, the board has been directed to study whether the management of the market order at the end of the trading time and the circuit breaker arrangement related to daily fluctuations up to 15 percent in the second market transaction of the listed company is necessary or not and submit it to the Board within a week along with suggestions.

The board has also directed the government to make the process of classifying listed companies more objective on the basis of their financial soundness, liquidity and corporate governance.

The committee has been asked to collaborate with the institutions that count the existing indices to conform to the established international standards by diversifying the investable and predictable indices such as NEPSE-20 and NEPSE High Cap on the basis of capital, return, and liquidity.

Directives have also been issued to review the sensitive index by making legal and procedural arrangements and to make the system related to the pricing of the first transaction after listing of corporate entities scientific in line with international practice.

Similarly, the board has been asked to study and recommend whether legal and procedural reforms are necessary in respect of listed companies that have been listed for a long time but are not actively engaged in the secondary market.

Directives have also been issued to develop and implement a separate arrangement on the portal of NEPSE for disseminating the official information of the listed organizations.

The board has also directed NEPSE to conduct at least one financial literacy programme in a month. Finally, the board has also directed to effectively implement the provision of providing money to the customers during the T2 period of securities transactions.

The directives cover a wide range of issues ranging from technological improvements in the trading system, possible use and regulation of AI, mobile transactions, index restructuring, review of circuit breakers, company classification, information flow, financial literacy, and the process of disbursing money to investors.