Manipulators Found to Inflate Stock Price in NEPSE by Creating Artificial Orders; Regulator Fights Back With a Tweak

SEBON has approved the proposal of the exchange to remove the AON order provision from its online trading system.

SEBON, the stock market regulator, claims the All-Or-Non order is found to have been used by manipulators to create artificial order spikes. This makes it a convenient weapon to manipulate investor psychology, and hence the stock price.

The All-Or-Non order allows an investor to direct the Trade Management System to only sell their shares if a buyer wants the entirety of the sell order amount and vice versa. This was intended to ensure that the sellers do not get left with an unsold remnant if they want to sell all their shares, and buyers do not buy a partial amount.

However, this quickly became a hack for manipulators to put an obscurely large amount of buy or sell AON order at an obscure price. Such orders were virtually impossible to be executed, and they were seen on the market depth forever, impacting investor psychology.

While NEPSE had proposed to remove the AON order altogether, the board has only given the approval to remove AON buy orders from this week. The AON sell order will be operational as usual. Nonetheless, the exemption of the AON order feature will impact investors who trade in bulk. The large order has to be executed in multiple transactions, hence generating a higher fee and broker commission.

The regulator has been active in recent days on matters related to market manipulation and immoral market activity. While some investor claims the regulator's interception itself plays a role to create panic in the market, the regulator claims its actions are intended to the overall health of Nepal's maturing capital market.

Additionally, some investors have raised the concern that NEPSE is a member of the World Federation of Exchanges (WFE), and is thus required to approve any change it makes to its operating policy. However, it is important to mention that NEPSE is only given the "affiliate" rank in the WFE, and not of a member. Thus, the implications of the sudden change in order policy are only being studied.

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