CDS set to boost share market
KATHMANDU,JAN 5:
The capital market regulator has expressed hope that the operation of central depository company will change the face of the secondary market.
“Since the operation of Central Depository System (CDS) will displace manual share transfer with automated system allowing the hassle free participation of investors outside the valley in trading due to easier settlement,” said chairman of Securities Board of Nepal (Sebon) Baburam Shrestha in a press conference organised to discuss CDSC bylaws today.
CDS is supposed to promote securities market in the cities outside the capital where despite the presence of brokerage services the difficulty of share transfer and settlement has discouraged the transaction, he added.
At present it takes about two months for the shares to get transferred and settled by the stock exchange.
“CDS and Clearing Ltd (CDSC) will start the operation within one month at latest,” he said. The CDSC was granted license by the capital market regulator last August but it has not been able to get the operations started due to delay in getting its bylaws approved from the regulator.
Last week, regulator has also approved the company’s bylaws paving the way for the operation of eagerly awaited central depository.
Earlier, the board had refused to approve the CDSC bylaw and directed it to revise the fee structure as the transaction would have been expensive affair for the investors. “The current fee structure is determined at minimum threshold so that company will be at break-even point,” chairman said.
The regulator has not yet given membership to the depository participants that are an integral part of central depository’s settlement process. The depository participants will hold the investor’s records in a dematerialised form. They will act like bank for the securities while CDSC is going to be the clearing house that will settle the account after each share transactions.
According to the CDS Regulation-2068 any a bank or financial institution, stock broker, registrar and transfer agent, custodian or such other entity as may be prescribed by the board from time to time. The depository participants need to have Rs 1 million net worth to get license.
“Merchant bankers seem to be better suited as depository participants due to net worth and infrastructure which brokers lack but the adjustments might be made in order to include the stock brokers as depository participants,” director of Sebon Niraj Giri, said, adding that the larger the number of depository participants more beneficial for the investors.
The operation of CDSC will contribute in higher number of transaction as dematerialisation of physical scrip will make multiple transactions possible in a single day,” said director of Sebon Parishta Poudel. “The CDSC will deposit the bonus shares and shares bought in public offerings automatically in the investors account at depository participants.”
The listed companies need to apply to get their shares dematerialised to CDSC within the six months of its operation.
Ceiling increased
The government is going to increase the ceiling for source disclosure while trading in the share market from current Rs 1 million to Rs 10 million. “We have completed necessary consultations with Finance Ministry and Nepal Rastra Bank and they have agreed in principles,” informed chairman of Securities Board of Nepal Baburam Shrestha. The ceiling fixed as per anti money laundering law is partially blamed for pulling down stock market. However, the government has to inform Financial Action Task Force about the decision as the international body has reservation on Nepal’s case.
Source: THT
