NEPSE Introduces Key Trading Reforms to Enhance Market Efficiency

The Nepal Stock Exchange (NEPSE) has introduced significant amendments to its Securities Trading Operation Regulations, 2075, aiming to make Nepal’s capital market more dynamic, flexible, and responsive. The revised provisions include changes in daily price limits, pre-open session rules, and circuit breaker mechanisms. However, the exact implementation date has not yet been finalized.

According to NEPSE, the amendments were approved by the Securities Board of Nepal (SEBON), and the official directive has already been received. Despite this, the operational rollout will depend on a forthcoming decision by NEPSE’s board meeting, which is expected soon.

One of the most notable changes is the increase in the daily price fluctuation limit for listed companies. Previously, share prices were allowed to move within a 10 percent range in a single trading day. Under the new rule, this limit has been expanded to 15 percent, allowing greater upward and downward movement.

Market authorities believe this revision will help improve liquidity and price discovery in the secondary market, especially during high-volatility trading sessions. Investors will now see faster adjustments in stock valuations based on demand and supply dynamics.

NEPSE has also revised the rules governing the pre-open session, which operates before the regular trading hours. The session runs from 10:30 AM to 10:45 AM and is used to determine opening prices based on buy and sell orders.

Under the updated regulation, price movement during this session will now be allowed within a ±5 percent range. Previously, this range was more restricted, often causing an imbalance between buy and sell orders at market opening.

Officials stated that the broader price band will help establish a more realistic opening price and reduce abrupt fluctuations when the market officially begins trading.

The circuit breaker system, which temporarily halts trading during extreme market volatility, has also been updated.

As per the new arrangement:

1. If the NEPSE index moves ±5 percent within the first two hours of trading, the market will be suspended for 15 minutes.
2. If the index continues and reaches a movement of ±8 percent, the market will be closed for the rest of the day.

Previously, the thresholds were lower, with a 4 percent movement triggering a longer halt and a 6 percent movement leading to market closure. The revised framework is designed to balance investor protection with smoother market continuity.

NEPSE has also approved the introduction of an After-Market Order (AMO) facility, which would allow investors to place orders outside regular trading hours. However, the system is not yet operational and will be implemented at a later stage once technical preparations are completed.

Market analysts believe that the AMO system could significantly enhance convenience for retail investors, especially those unable to actively trade during market hours.

NEPSE stated that these reforms are part of a broader effort to modernize Nepal’s capital market infrastructure and align trading practices with global standards. By expanding price limits and updating volatility controls, the exchange aims to improve market efficiency, reduce artificial constraints, and encourage deeper participation from investors.

Officials also emphasized that investor protection remains a priority, and the revised circuit breaker rules are structured to prevent excessive speculation while still allowing healthy market movement.

Although the reforms have been formally approved by SEBON, NEPSE has clarified that the new rules will come into effect only after internal approval and system readiness. A board meeting is expected to finalize the implementation timeline in the coming days.

Once enforced, the updated regulations are expected to mark one of the most significant operational changes in Nepal’s capital market in recent years, potentially reshaping trading behavior and market volatility patterns.