Full-fledged CDS operation likely in six months
ShareSansar, April 20:
Central Depository Service (CDS) has come into partial operation after it actually carried out the first electronic share trading on April 15, the second day of Nepali New Year.
Now CDS and Clearing Limited, a subsidiary of Nepal Stock Exchange Limited, has issued public notices today urging all the listed companies to dematerialize all its scrips within three months.
CDSC has also appealed to all the share investors to open demat account by approaching one of the Depository Partner (DP) within six months.
As per the article 34 of the CDS Regulations-2067, all the listed companies must dematerialize all its shares within three months, and that share transactions can only take place through demat account after six months of the first day of (the electronic) trading under the CDS.
“If the listed companies and other stakeholders comply with our appeal, full-fledged online trading can take place in less than six months,” Sabina Pujari, a senior official with CDSC told ShareSansar today.
She further informed that today itself CDSC was writing individually to each and every listed companies to approach CDSC for dematerialization of their scrips.
CDSC has also decided to urge the SEBON and NEPSE to issue directives to the listed companies to mandatorily dematerialize their shares within three months, and appeal to the share investors to do the needful at the earliest.
“We are also planning to hold a few orientation workshops for the stakeholders, especially the share investors so that they are fully aware of the benefit of CDS,” Pujari further said, adding that they are planning one of the workshops in the capital shortly.
Welcoming the CDSC notices, President of the Brokers’ Association Narendra Sijapati said that the notices were issued following consultation with the brokers, investors and other stakeholders over the past few days.
“Now we see no reason as to why full-fledged CDS operation cannot take place within six months,” says Sijapati. “All the brokers have already become clearing agents, and we can assure everyone that all of them will become DPs Shrawan (mid-July).”
CDS, which was in a sort of limbo after the stock brokers opposed a provision to deposit Rs ten lakh to become clearing members at the CDSC over the past few months, started to gain momentum following a breakthrough toward September after the CDSC agreed to let the stock brokers to furnish bank guarantee worth Rs 10 lakh instead of depositing the sum, the latter have decided to associate them with the CDSC as clearing agents.
Once this process is complete, only those stock brokers, who are registered at the CDSC, can act as the clearing agents.
Then there was another major hurdle. For the smooth operation of CDS, is quite necessary that brokerage firms become the DP members. But the brokers could not become the DP due to the CDS regulations that envisaged a DP’s net worth must be Rs 1 crore. Only a few brokerage firm met the criteria.
Only a few weeks back, the CDSC agreed to amend the provision to allow a firm with Rs 50 lakh net worth as its DP.
Little wonder that there are only nine DPs so far-- Civil Capital Markets Limited, Ace Capital, Nabil Investment Banking, NIBL Capital, Laxmi Capital, Everest Bank, Siddhartha Capital, NMB Capital and Bank of Kathmandu Limited.
Global IME Capital and a brokerage firm have also applied for DP, according to Pujari. And as Sijapati informed, all the brokers are in the process to become the DP within three to four months.
Nevertheless, for the full fledged operation of CDS across the country, BFIs with widespread network such as state-run banks such as Nepal Bank Limited and Agricultural Development Bank Limited should become the DP, according to the stakeholders, including CDSC officials.
Though only 16 out of 226 listed companies have dematerialized their physical shares so far and that just ten more companies are in the process of getting their shares dematerialized, CDSC officials say that this should not be a major challenge if the listed companies start approaching the CDS for dematerialization of their shares.
“If they approach us immediately, we can install our system for them within a few days, and all the scrips can be easily dematerialized within a month or two,” says CDSC official Pujari.
Yomari Inc Private Limited, a software company, is carrying out the digitalization work for a year.
Yes, the full-fledged operation of CDS seems possible within six months, but share trading from across the country will still not be possible.
“NEPSE has just begun the process to seek consultants to develop the online trading system,” whines Sijapati. “It may take several more months if not years before they can set the system in place. The market now has a big mouth and stomach, but a very thin neck to swallow.”
But he is quick to add that full-fledged CDS operation is a big achievement in itself, which will go on to fuel the share market to a new high this year.
