Nepal Stock Exchange to issue brokerage licences for provinces amid sustainability concernsThe move is in line with recommendations made in December to ensure better transparency and address structural and operational issues.
In its reply to the Securities Board of Nepal (SEBON), the stock market regulator, NEPSE said it would invite interested companies to operate brokerages at each of the country’s seven provinces after it is through with its preparation.
“NEPSE has started working in line with the directives the regulator had issued,” said Murahari Parajuli, a spokesperson for NEPSE.
SEBON last week had asked NEPSE and CDS and Clearing to report on the progress of implementation of its policies related to licencing and other issues. The policies are based on the 58-point recommendations made by the Ministry of Finance last December to ensure better transparency in the secondary market and address its multiple structural and operational issues.
SEBON at the time said that NEPSE had missed out on providing banks with brokerage licences, appointment of market dealers and reducing the number of days for transaction settlement. As well, it had said the establishment of an investors’ protection fund by NEPSE was pending.
Stockbrokers are not sure if the licences allowing new brokerages to operate in the provinces would help their business.
“The existing brokers have been operating from the provinces through a number of remote workstations which haven’t yielded good earnings. So, I see no meaning in allowing separate licences to open new brokerage companies at the provincial level,” a stockbroker, who refused to be identified, told the Post.
In 2017, NEPSE had allowed 50 brokerage companies operating in Kathmandu to open their branch offices outside the Kathmandu Valley and operating via remote workstations. According to NEPSE, a total of 56 such remote work stations have come into operations. These are mainly based in Biratnagar, Birgunj, Dharan, Pokhara, Narayanghat, Itahari, Nepalgunj, Butwal, Dharan, Pokhara and Dhangadhi.
NEPSE’s record shows that the domestic stock market registered stock trading worth Rs110 billion in 2018-19. Most remote workstations earn Rs 500,000 to Rs 600,000 on average in a day of trading, according to the stockbrokers.
“Based on the broker’s commission of 0.6 percent at present, a single workstation earns a daily average income of Rs 4,000. Out of the income, brokers need to pay 15 per cent in income tax and 20 per cent as fees for NEPSE and SEBON, following which only a tiny amount is left for the brokerage firm,” said the stockbroker. “The leftover amount is hardly enough to cover the expenses of four employees and office rent.”