50 Brokers Syndicate Finally Broken; Seven New Brokerage Licenses Awarded

Tue, May 23, 2023 9:37 AM on Featured,

The syndicate and monopoly of the existing 50 brokers in the Nepali share market has been finally broken as seven new brokerage licenses have been awarded. 

The seven new companies which can now operate as brokerage houses are as follows:

1. Bhole Ganesh Securities Limited

2. Capital Max Securities Limited

3. Himalayan Brokerage Company Limited

4. Sun Securities Private Limited

5. Miyo Securities Private Limited

6. Sharepro Securities Private Limited

7. Property Wizard Limited

A total of eight companies had submitted application after fulfilling infrastructural pre-requisite, following an inspection of the same the Securities Board of Nepal (SEBON) has awarded the licenses to seven new companies. 

The seven new companies which can now be operational have received license under the limited working securities category. The limited broker licensee will be limited to only buy/ sell as per customers instructions. In line with SEBON's regulation for the provision of awarding new licenses, there will be three different licenses offered: general securities dealer, full operating securities broker service, and limited working securities broker service.

Read Here: Quota System Abolished in Share Broker License, Any Company Above Rs 20 Crore Paid Up Capital Can Apply For Broker License

Earlier, in three different phases, a total of 43 companies among that 46 which had applied previously had received preliminary license or letter of intent (LOI). 

The entry of new brokerage houses has occurred after a long haul of 13 years. Almost 15 years ago, additional 27 brokerage houses had applied and subsequently received brokerage licenses after two years, following which the numbers of brokers had reached 50. 

During that time, all procedures relating to the secondary as well as the primary market were held manually and were deemed inconvenient, cumbersome, and limiting with regard to accessibility.   

However, in the recent past, the share market has done a 360-degree somersault for the good. After the operation of the online trading management system, the number of Demat account holders has spiked from 3 lakhs to in excess of 56 lakhs. Even in the secondary market, the number of investors has swelled from 25,000 in 2068 to more than 20 lakhs. Similarly, according to the latest statistics by the CDSC, even the number of Licensed Depository Participants (DPs) has reached to 83.

In the same manner, with the expansion and diversification of the capital market with the listing of companies from across sectors including Hydropower, Hotels, and Manufacturing in NEPSE, the scene in the previous decade where banks and financial institutions constituted most of the market capitalization is gradually shifting. In addition, SEBON plans to introduce not just new companies but new categories to facilitate the listing of even smaller companies in the share market. SEBON’s recent proposal for the categorization of companies with Rs 25 crores in paid-up capital as Small and Medium Scale Enterprise (SMEs) is evidence of the Board’s attempt to facilitate a growing market.

Moreover, even the number of listed Mutual Funds has reached 40 while a few are due to be listed, contrary to only two or three shares under the category trading in the past one decade.

Similarly, with the recent announcement of the government to facilitate investments of Non-Residential Nepalis (NRNs) living abroad in the capital market, and rising digital literacy the existing brokers are at the cusp of receiving more potential customers, almost overwhelming to an extent.

There have been several instances where complaints of inefficient services have been labeled against the existing brokers. It is not uncommon to witness customers lamenting being provided incompetent services on several occasions from delays in payment after sale of security to unattended customer calls during peak trading hours.

Even these services come with a hefty price tag of 0.4% broker commission.

Despite a growing market, the number of brokers have remained stagnant at 50. 

Additional brokerage houses were required to cope with the growing demand of the market and safeguard the investments of the investors. Therefore, to address the demand of the growing market SEBON carried forth the procedures to award new brokerage licenses.  

The advent of new brokerage houses is beneficial to all concerned parties including the government, share market, old brokers, new brokers, the economy, and above all the customers.

READ MORE on this: Navigating the Future: Examining the Role and Benefits of New Brokers