Digital clearing, settlement of securities transactions starts

KATHMANDU, APR 16 -

CDS and Clearing (CDSC), a subsidiary of the Nepal Stock Exchange (Nepse), officially started clearing and settlement of securities transaction s digitally on Monday. The paperless system allows processing to be done in an easier and faster way. While the manual system used to take at least three days to transfer ownership of shares after a sale, the central depository system (CDS) does it instantly.

According to CDSC, the CDS acts as the central depository (safekeeping, deposit and withdrawal of securities certificates and transfer of ownership/rights) for various instruments such as equity, bonds and warrants in a dematerialised (electronic) form. Under the new provision, stock ownership has to be first converted into Demat format.

A Demat account can be opened through Depository Participant (DP), an agent appointed by the CDSC. CDSC has named seven agents as of the present. They are Civil Capital Market, Ace Capital, Investment Management and DP Ltd, Nabil Investment Banking, NIBL Capital Markets, Laxmi Capital Market and Everest Bank.

Similarly, the companies listed on Nepse also have to open a Demat account with CDSC. Potential investors, after being okayed for a Demat account, can post the number of shares they want to buy or sell through their brokers.

According to CDSC company secretary Subodh Dhungel, the should enter the assigned number of shares in “Pull Account” through which trading is done. Investors are required to pay Rs 50 to open a Demat account and an annual fee of Rs 100. “Other processing costs are born by the concerned companies,” said Dhungel.

Under the new system, brokers also have to become members of CDSC to act on behalf of their clients. Other companies which have obtained a license from the Securities Board of Nepal (Sebon) can also perform the clearing function of stock transaction s. The new provision is expected to minimise hassles for investors while buying and selling stocks. The system also makes it easier to acquire rights shares issued by the companies concerned.

“The new system allows traders to do multiple transaction on the same day,” said Dhungel. According to him, investors can also buy and sell shares in small quantities.

All the listed companies will have to open a Demat account at CDSC. Out of the 226 companies listed on Nepse, only six have signed agreements with CDSC for dematerialization.

They are Ace Development Bank, Agricultural Development Bank, Everest Finance, Bank of Kathmandu, Laxmi Bank and Himalayan General Insurance. According to CDSC, another 11 companies are set to sign an agreement.

CDSC said the digital system would come into full-fledged operation only after six months. “After its full-fledged operation, we have planned to initiate the e-voting system under which shareholders can vote online for the candidate of their choice in the company’s annual general meeting,” said Dhungel.

Source: The Kathmandu Post