Central Depository System scheduled to open on Oct 1
KATHMANDU, SEP 26 -
Central Depository System and Clearing Limited (CDSCL) is scheduled to start operations on Oct 1 after having missed a number of earlier opening dates. The Nepal Stock Exchange (Nepse) and CDSCL have agreed to transfer the task of clearing and settlement to CDSCL by next week.
Initially, the change will not make any difference to the functioning of the capital market as CDSCL will be clearing and settling transactions manually. “Nepse will provide login facility to us, and brokerage firms will visit our office for clearing and settlement,” said a CDSCL official. “This will familiarise our staff with the job before CDSCL goes electronic.”
Full-fledged electronic operation of CDSCL is still a long way off as a majority of the listed companies are yet to register with CDSCL and the Securities Board of Nepal (Sebon) has not approved the Clearing and Settlement Bylaws.
Currently, only a couple of banks and financial institutions have registered their securities at CDSCL and it is also hindering the electronic operation of the capital market through CDSCL. “Without the listed companies registering their securities at CDSCL, they can be dematerialized,” said the CDSCL official.
Converting physical securities to electronic form is the first step before electronic trading of shares can be done. CDSCL officials have demanded that Sebon force the companies to register their securities at CDSCL as soon as possible. “So far, more than a dozen companies have applied to list their securities with us, and we hope that more will follow very soon,” said an official.
One reason for the delay in starting electronic trading is that Sebon hasn’t approved the draft of the bylaws sent by CDSCL in August citing “serious flaws”. Without the Clearing and Settlement Bylaws, full-fledged operation of CDSCL is not possible.
Sebon’s major concern regarding the bylaws is a statement in Section 2 which provides for creating an autonomous department for clearing and settlement at CDSCL. A Sebon official said that there should not be a separate autonomous unit as CDSCL itself is entitled to perform depository, clearing and settlement of securities. “A separate autonomous unit within CDSCL will definitely invite a conflict of interest within the company in the near future,” said the official. “Also, monitoring and regulation by the board will be difficult.”
Likewise, the board has sought operational details of the settlement and guarantee fund mentioned in the bylaws. Clause 58 of Section 7 mentions such a fund, but has given no operational details.
A CDSCL official said that the settlement and guarantee fund was a very new concept in Nepal although it is considered to be a very important element of the capital market throughout the world. “Even Nepse has not established such a fund,” said the official. “We are planning to hire expert consultants from abroad to prepare the operational details of the fund.”
Source: The Kathmandu Post
