Nepse urges OTC trade of sharesThe Nepal Stock Exchange (Nepse) has asked public companies, delisted firms and state-owned corporations whose shares are not traded on the secondary market to register with the over the counter market (OTC) to allow trade of their shares.
The Nepal Stock Exchange (Nepse) has asked public companies, delisted firms and state-owned corporations whose shares are not traded on the secondary market to register with the over the counter market (OTC) to allow trade of their shares.
Shares can be bought and sold at the OTC market without others finding out the price at which the transaction was done. The OTC market is, therefore, less transparent than exchanges, and are also subject to fewer regulations.
The OTC market has been rarely used to trades shares in Nepal. Three years ago, shares of Nepal Bank Limited were traded in the OTC market for the first time. In this transaction, 71,928 Nepal Bank shares belonging to the government were transferred to its 2,664 employees, according to Nepse.
As per Nepse’s latest notice, shares of companies that have been de-listed or failed to get listed on Nepse, public companies which have not been yet been listed and government-owned enterprises can be traded in the OTC market.
Nepse General Manager Sitaram Thapaliya said that shares of public limited companies that have not been listed on the stock market must be traded in the OTC market if they have been conducting transactions as if they were private limited companies.
“There is lack of knowledge among the shareholders of such companies and among the regulatory agencies that their share transactions should be done in the OTC market,” he said.
According to the OTC Bylaws, shares of delisted companies should be traded in the OTC market. The government introduced the OTC Bylaws four years ago. Nepse has been delisting companies that are not active in the stock market.
In many countries, companies go to the regular stock exchange after their shares have been traded in the OTC market as it gives their general market value, according to Thapaliya.