The taskforce formed under the Securities Board of Nepal has concluded that the software used by Nepal Stock Exchange to operate the online trading system is of low quality which has resulted in frequent disruptions during stock trading.   

In the report that the board submitted to the Ministry of Finance two weeks ago, the regulator has pointed out the flaws in the online trading system, suspecting the high level officials of the stock exchange to be involved in embezzling money while awarding the contract to YCO, an Indian vendor company. “The report shows that the stock exchange has focused only on developing a matching system in the software rather than addressing multiple tasks related to online trading,” said an official of the board.

The front line regulator launched the new platform named NEPSE Online Trading System on November 6 with the aim of providing direct access to individual investors, allowing them to invest in shares by themselves. It has been over six months since the implementation of the system yet investors are still facing technical glitches that regularly disrupt the transaction of stocks at the secondary market.

Additionally, the poor quality system is prone to hanging frequently and even displays incorrect stock data and prices, said the source.

Similar problems appeared when the stock exchange offered stockbrokers early access to the system for the first time last July. This disrupted trading for a number of days as well. But the stock exchange conducted user acceptance testing and gave the go-ahead to the new platform instead of removing flaws in the software.

According to the source, there are a large number of complaints filed at the Trading Management System, a platform to address the investors’ grievances operated by the bourse. “On an almost daily basis, the Nepal Stock Exchange receives complaints, most of which the authority fails to address.” The source said it had asked the Nepal Stock Exchange to implement an internationally compatible system to run the online trading platform.

“During the process of selecting the company, the board had asked the Nepal stock exchange to award the contract only to a company with a proven track record. But it was found deliberately awarding the contract to YCO which has no credible history of developing this type of software.”

The Commission for the Investigation of Abuse of Authority has also been investigating on possible corruption in the procurement of the software used to operate the automated online trading system as it has been repeatedly crashing and disrupting trading, raising doubts about its quality. Two months ago, a group of enraged investors filed complaints at the anti-graft body, seeking the investigation against the Nepal Stock Exchange on the issue.

Following the concern from the anti-graft body, the Finance Ministry had asked the board to probe on the issue. For the purpose, the board formed a three member panel under Nabaraj Adhikari, deputy executive director of the board.

The Nepal Stock Exchange officials however denied the charge, stating that the stock exchange selected the vendor as per the Public Procurement Act, 2007.

The bourse earmarked Rs180 million to pay YCO for software development.