Kathmandu. The Securities Board of Nepal (SEBON) has started preparations to introduce intraday trading in the share market of Nepal. With the aim of making the Nepalese capital market modern, competitive and of international standard, SEBON has released a detailed concept paper for the operation of intraday trading in the secondary market.

According to the ‘Capital Market Strengthening and Revitalization Action Plan-2083’ issued by the Ministry of Finance, Government of Nepal and the provisions mentioned in the policy and program of the current fiscal year, the concept paper on the implementation of inter-day trading of securities in Nepal, 2083 has been prepared and opened for the suggestions of the stakeholders and general investors.

SEBOL has proposed to start intraday trading in the initial phase of ‘Buy First and Sell Later’. The Board has said that the concept of selling securities and debt transactions and buying later is done only after the necessary infrastructure is in place for safe short sale.

The board has said that the draft of the regulations related to margin loan transactions is being prepared and it is being finalized by incorporating the suggestions received from the stakeholders. In the meantime, the ‘Concept Paper on the Implementation of Inter-Day Transaction of Securities in Nepal, 2083’ has been brought for public consultation with the objective of preparing the necessary policy and legal provisions for the implementation of inter-day transactions.

The proposed concept paper has made risk-based regulation, phased implementation, technology-based real-time transactions and monitoring and transparent market operation with first priority to investor protection.

The Board has proposed to implement the inter-day transactions in a phased manner considering the existing market structure, institutional capacity and the situation of risk management.

It has been proposed that only limited securities which are regularly traded in the initial phase, have sufficient liquidity and are comparatively low risk of market misuse will be eligible for interday trading. Based on the experience gained from the trial phase and the assessment of the risk, the concept of expanding the scope of trading later has been put forward.

The concept paper proposes to start the inter-day trading in the first phase by buying first and then selling. That is, the investor will be able to buy the securities within the trading period and sell them during the same period.

However, it has been proposed that the business of short selling and then buying should not be started immediately. For this, it is proposed to start such transactions only after the necessary arrangements for securities loans and loan transactions and the necessary infrastructure for safe short sales are adequately developed.

The board has said that necessary legal and regulatory provisions should be prepared before the inter-day trading can be fully resumed immediately. For this, it has been proposed to prepare the standards of qualified securities, the criteria related to qualified investors, the working standards of securities brokers, the risk information, the margin and risk management system, the market monitoring system and the technical infrastructure.

The concept has been put forward to implement the inter-day transactions in a phased manner by evaluating the readiness status of the system on the basis of the necessary preparations.

The board has proposed to conduct such transactions only on limited securities that meet certain criteria without opening interday trading in all securities in the initial phase. For this, the concept is to take into account the issues of regular transactions, adequate liquidity, price fluctuations and risk of market abuse. Based on the experience gained from the trial and the risk situation, there is a plan to gradually expand the number of eligible securities and the scope of transactions.

The meeting was attended by a committee formed to coordinate and facilitate the implementation of the second market reform plan of the securities market with representatives from the Securities Board of Nepal, Nepal Stock Exchange Limited, CDS and Clearing Limited and Stock Brokers Association of Nepal.

According to the Board, the same committee has prepared a concept paper on the implementation of inter-day transactions after conducting necessary study. The board has released the concept paper on the implementation of interday transactions of securities in Nepal, 2083 and its executive summary and sought suggestions from investors and stakeholders.

Details of the various topics covered in the concept paper and the topics that investors can suggest can be viewed through the link provided by the board.