Shanker Dev Campus, kathmandu, Nepal BBA, TU

1. PRESENTATION ON
SECURITIES MARKET MECHANISM IN NEPAL
TEAM MEMBERS:
PAWAN KAWAN
BIKASH SAPKOTA
SANGITA ADHIKARI
RANJITA SAPKOTA
SUNITA BARNAWAL

2. Security Market: Background
 Securities: Negotiable instrument representing financial value
 Security Market: Mechanism where securities are traded
 Types of security market
I. Primary Market
II. Secondary Market
 Quote Driven Market
 Order Driven Market
 Historical Background:
 In 1602 the Dutch east India Company issued the first share
on the Amsterdam stock exchange
 India was the first country to start trading of securities in Asia

3. Major Securities Market
 New York Stock Exchange
 London Stock Exchange
Established in 1817
 By 2010 in 1801
Foundedthere are 2317 companies listed
Bombay Stock Exchange
It has December 2010, the of US$ 13.39 trillion on Dec 2010
As of total market capture Exchange had a market capitalization of
Established in 1875
World largestexchange in Asia
US$3.6 trillion stock exchange
Oldest stock
Fourth largest stock exchangeAutomated Trading System (ATS)
In 1999, the BSE installed the in the world (and the largest in
Europe) market capitalization of listed companies is US$ 1.28
The total
trillion as of Feb 2010

4. Security Market In Nepal
Background of securities market
Flotation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank
Ltd. in 1937
 Introduction of the Company Act in 1964,
the first issuance of Government Bond in 1964 and
the establishment of Securities Exchange Center Ltd. in 1976
 Converted Securities Exchange Center into Nepal Stock
Exchange in 1993
Order driven market
SEBON

5. Primary Market In Nepal
Investment Banker In Nepal
 Investment banker is known as Merchant Banker
 Financial professional who helps companies and government
organizations in acquiring capital
 Merchant Banker involves sale of security to the public

6. Merchant Bankers in Nepal
S. N. Merchant Bankers
1. NSM Merchant Banking Ltd.
2. NCM Merchant Banking Ltd.
3. Investment Management Merchant Banker Ltd.
4. Growmore Merchant Banker Ltd.
5. Citizen Investment Trust
6. NABIL Investment Banking Ltd.
7. Vibor Capital Ltd.
8. Civil Capital Market Ltd.
9. Ace Capital Ltd.
10. Beed Invest Ltd.
11. NMB Capital Ltd.
12. Elite Capital Ltd.
13. Laxmi Capital Market Ltd.
14. Araniko Capital Management Company Ltd.

7. Securities Issue Process In Nepal
1. Company Decision
2. Appointment of Issue Manager
3. Prospectus Preparation
4. Filling with the company’s information about
 Includes SEBON
5. SEBON’s review by the Prospectus Vetting Committee
 capital,
 financial
of SEBON situation,
There are member representing
management,
6. Clarification/Update
SEBON, promoters & directors, and
involving
7. Prospectus Approval by SEBON
 Nepal Rastra Bank,
 Stock exchange,
future prospectus
 Insurance Board and
 company registrar’s Office

8. Securities Issue Process In Nepal(contd…)
8. Issue Open and Issue Close
Issue should open within 2
9. Allotment andshould bemonths of prospectus approval
 Announcements
Refundingpublished at least 7 days before
the issue open.
Number of applications Time for refund
. Applications shall be accepted for a minimum period of five
and maximum of 15 working days from the date of opening
Up to 100,000 40 days
100,001 to 200,000 50 days
200,001 to 300,000 60 days
300,001 and above 70 days

9. Secondary Market In Nepal
Nepal Stock Exchange
 Located at Singha Durbar Plaza, Kathmandu, Nepal
Opened its trading floor 13 January, 1994
 Government of Nepal, Nepal Rastra Bank, Nepal
Industrial Development corporation and members are the
shareholders of NEPSE
 204 listed companies at present

10. Listed Companies In NEPSE
2
21
Bank and finance
4
4 Hotel
18 Manufacturing and
processing
Hydro power
4
Trading
Insurance
151
Others

11. Trading System of Nepal Stock Exchange
Open cry out system
Buyer A Seller C
SELLER
BUYER Broker
Broker
Transaction
hall of NEPSE

12. Automated trading mechanism
 Introduced fully automated screen based trading since 24th
August, 2007
 The NEPSE trading system is called ‘NEPSE Automated
Trading System ‘(NATS)
 Adopts the principle of an order driven market
 Aided by Asian Development Bank

13. Major features of Automated Trading Mechanism
 Client Management
 Order
 Price
 Execute at
 Retain until
 Condition
 Market Depth
 Settlement
 Blank Transfer
 Ownership transfer
 Circuit Breaker

14. Trading Days and Hours
Types of trading Days Trading time
Government security trading Sunday to Thursday 11 AM. to 12
Regular trading Sunday to Thursday 12 A.M. to 3 P.M.
Odd Lot Trading Friday 11 A.M. to 12 Noon

15. Brokerage Commission
Brokerage Commission for equity:
S. No. Trading Amount Brokerage%
A Up to 50,000 1
B >50,000 & <5,00,000 0.9
C >5,00,000 & <10,00,000 0.8
D >10,00,000 0.7
Brokerage commission for Government Bond:
S. No. Trading Amount Brokerage %
A Up to 5,00,000 0.20
B >5,00,000 & <50,00,000 0.10
C >50,00,000 0.5

16. Brokerage Commission(Contd…)
Brokerage commission for all other stocks except
equity and government bonds:
S. No. Trading Amount Brokerage %
A Up to 50,000 0.75
B >50,000 & <50,00,000 0.60
C >50,00,000 0.40

17. RECENT REFORM IN NEPSE
 Secondary trading of government Bond Started
 OTC market
 Trading of Promoters’ shares
 Establishment of Central Depository System
 Sensitive Index and float Index Introduced
 Trading from out of kathmandu valley
 Recommendation to add new brokers
 Real time information dissemination and online trading

18. Comparison of Nepalese security market with South Asian and Global context:
Basis NewYork Stock South Asian Nepalese
Exchange Security Market ( Security Market
Reffering BSE )
Initiation Around 17th Around 200years Late start around
century ago from British in 1937
Regime
Size(on the basis of Huge market Medium Small
market coverage)
Efficiency Highly efficient adopting the Is in infant stage of
market efficiency adopting efficiency .
Regulatory System The U.S Securities SEBI, SEC etc. SEBON
and Exchange
Commission(S.E.C)
Automated Trading All the trading is Has ATS in almost all Nepalese security
system based in Automated South Asian countries market is also based
trading system. on ATS and screen
based trading.

19. Contd…
.
Technology Highly Has a good Slow
adaptation sophisticated technology adaptation of
technology base technology
Participation All types of Dominated by Commercial
organization banking sectors banks
participation is
vast
Settlement Follows T+1 and Follow T+2 rolling Follows T+3
procedure real time trade settlement rolling settlement
settlement procedure procedure
process

20. Factors affecting the stock market
Foreign direct Investment
Inflation And Deflation
Foreign Markets
Globalization
Earnings and Emotions (2E’s)

21. Shortcomings of Nepalese security market
 Lack of experts
 Lack of credit rating agency
 Lack of institutional investors participation in transaction
 Restrictions for Foreign Direct Investment
 Foreign securities are restricted in NEPSE

22. Conclusions:
Conclusions
 Order driven security market
 Bank based security market
 Open Cry out system has been replaced by automated
trading system
 Lack of proper regulatory system and credit rating
agency
 Value weighted index
 Lack of public awareness towards security and its
trading