Nepal Stock Exchange expands electronic settlement systemInvestors now can conduct electronic transfers via any member bank by paying a fee
Stock traders can now settle transactions electronically through 76 banks and financial institutions, including all 28 commercial banks, with the Nepal Stock Exchange integrating its online trading system with all members of Nepal Clearing House. The system will come into force on Thursday.
The Nepal Stock Exchange had permitted only four commercial banks—Nepal Investment Bank, Global IME Bank, Prabhu Bank and Siddhartha Bank—to act as clearing banks after launching its automated online trading platform last November.
According to the Nepal Stock Exchange, stock traders have been connected to the banking system through the concerned brokers. Under the new system, investors can conduct transactions with any financial institution that is a member of Nepal Clearing House.
Nepal Stock Exchange spokesperson Murahari Parajuli said they had completed preparations to integrate the automated online trading platform with the system of Nepal Clearing House. “Investors now can conduct electronic transfers via any member bank by paying a fee,” said Parajuli, adding that they need not pay any charges if they carry out transactions through the four clearing banks.
Bharat Ranabhat, president of the Stockbrokers’ Association of Nepal, said investors would be able to conduct transactions by declaring the transaction amount limit in the Trading Management System of the Nepal Stock Exchange. “Following the integration with banks, stockbrokers can carry out stock transactions worth up to four times the declared amount on behalf of their clients,” said Ranabhat.
According to Ranabhat, stockbrokers have fixed the transaction limit in line with Nepal Rastra Bank regulations. He said the central bank had asked investors to block at least 25 percent of the proposed investment amount in their bank accounts. “Investors have to pay the remaining amount to their brokers within the prescribed time frame,” said Ranabhat.
The central bank allows investors to post orders worth up to Rs100,000 via the integrated system, Ranabhat said. “We will ask the government to increase the limit in the future.” With the Nepal Stock Exchange’s new automated online trading system still plagued by technical glitches, expanding electronic settlement could lead to added hassles, Ranabhat said.
The automated online trading system has broken down several times due to poor quality software, sometimes even displaying incorrect stock data and prices. “It is yet to be seen how efficiently the software can handle the added work load after being integrated with the banking system,” said Ranabhat.
The Securities Board of Nepal pointed out a number of flaws in the trading software in its report submitted to the Ministry of Finance. The Commission for the Investigation of Abuse of Authority is also probing the frequent breakdowns. Ranabhat claimed that the system was performing a lot better recently.
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