A UK-based company has applied to the Securities Board of Nepal (Sebon) to operate a commodity exchange. This is the first application Sebon has received to open a futures market since the related act and regulations were endorsed recently.

According to Sebon, Global Markets Exchange Group International LLP (GMEX) of London and a group of non-resident Nepalis have applied for permission to establish the commodity exchange. The GMEX Group operates GMEX Technology, GMEX Innovation, GMEX Service and GMEX Investment in England.  Sebon Chairman Rewat Bahadur Karki said the group had applied to set up the commodity exchange under the name Nepal Commodity Exchange Limited. 

“The group has expressed interest to work as a strategic partner in the area,” said Karki, adding that the group would be holding a 51 percent stake in the proposed exchange. 

According to Karki, the regulator has been studying the application from GMEX. “Following an assessment of the letter of intent, we will ask the group to submit an action plan.”

Last July, the Legislature-Parliament endorsed the Commodities Exchange Market Act 2017. Following the endorsement of the act, Sebon created regulations to govern the operation of the commodity exchange. 

Earlier, several firms had been engaged in derivatives trading, but in the absence of a legal framework, investors were at risk of losing their money due to possible fraudulent practices. According to Sebon deputy spokesperson Niranjaya Ghimire, the new regulation permits any foreign company to be a strategic partner of a commodity exchange operator in the country.

According to him, aspiring foreign companies must possess a valid operating licence and should have been involved in a commodity exchange for the last five consecutive years. 

Likewise, they are required to produce an authorisation certificate issued by the market regulator of the country where they are operating. 

Commodity exchange platforms are required to have a paid-up capital of Rs500 million under the new regulation. They need to provide a full-fledged online trading system to their customers.  

The new regulation has also scrapped the licences of all firms conducting brokerage services in derivative related transactions. Sebon has barred brokerage firms from signing new contracts. “However, none of them has applied for a new licence so far,” Ghimire said.  

Karki: Sebon closely watching market

KATHMANDU: Sebon Chairman Karki said on Saturday that the regulator had been strictly monitoring the secondary market to minimise risk to investors due to possible bad practices. 

Speaking at a programme organised to mark the 25th anniversary of the Nepal Stock Exchange (Nepse), Karki said that the regulator had given priority to issues related to money laundering, full-fledged automation in stock trading, promoting foreign investment in the share market and expanding the number of remote work stations in the country’s rural areas. 

Finance Minister Gyanendra Bahadur Karki stressed the need to reduce the service 

charge, increase access to the capital market for people in rural areas and improve the infrastructure related to stock trading. 

Likewise, Revenue Secretary Shishir Kumar Dhungana called for divesting government shares on Nepse, promoting bond transactions, facilitating real sector companies on Nepse and mobilising small and scattered capital in rural areas through the secondary market for the promotion of the country’s capital market. (PR)