The Securities Board of Nepal (Sebon) on Thursday said it was going ahead with its plan to establish a second bourse despite opposition by the Nepal Stock Exchange (Nepse), investors’ forum and other related bodies. 

The proposed secondary market will be established under the corporate model, according to Sebon.

Nepse is the only secondary market operating in the country. The government holds a 58.66 percent stake in Nepse which has a paid-up capital of Rs200 million. Nepal Rastra Bank holds 34.6 percent of the shares while NIDC Development Bank and member brokers own 6.12 percent and 0.62 percent of the shares respectively. 

For the past few months, Sebon has been mulling to open another stock exchange in a bid to bring competition in the secondary market. As per Sebon, the move is part of a reform initiative that seeks to modernize the stock market and attract more real sector companies to list their shares. 

“As the market size has grown immensely in the past few years from Rs6 billion to over Rs26 billion, a new stock exchange is a must to absorb the growing volume of transactions,” said Sebon Chairman Rewat Bahadur Karki. He added that they were considering licensing a new company to operate the second stock market. 

Relations between Sebon and Nepse have frequently been rocky. Disagreements have surfaced over enlisting more clearing banks, opening remote work stations outside the Kathmandu valley and hiring a vendor to upgrade Nepse’s computer system.

Sebon’s move follows the government’s plan to privatise Nepse and the central bank’s decision to divest its shares in the company. Meanwhile, Nepse has been upgrading its system to go into full-fledged online stock trading. 

“Considering the limited market size, it will be a mistake to open a new stock exchange instead of improving the existing one,” said Nepse officials. 

Karki defended Sebon’s decision saying their intention was not to upset the concerned agencies. “The step is a way forward for reform in the sector by promoting competition,” said Karki.

Niraj Giri, executive director of Sebon, said they planned to set up the new stock exchange as per the Stock Exchange Operation Regulations 2007. 

According to him, Sebon would prepare a number of measures to effectively regulate the capital market by this fiscal year.

Giri said the regulator had been creating a policy to make public account number mandatory for investors to invest in the secondary market.