KATHMANDU, JAN 28 - The Nepal Stock Exchange (Nepse) plans to give a separate window from
its stock trading software to persuade institutions to step forward and
act as market makers.
Marker makers buy and sell stocks in bulk to influence prices and
maintain stability in the stock market in a bid to protect general
investors from severe fluctuations as has been happening now. “The
technical tasks are currently being performed,” said Nepse General
Manager Sitaram Thapaliya. “We hope to complete the preparations within
the next two months.”
Nepse felt the necessity for a market maker as a few big invest-ors
have been dictating the market’s direction which has ruined smaller
investors. Nepse has been working to remove the influence of a few
investors by asking listed companies to inform it first about decisions
that might affect their share prices.
Efforts to give a separate window at Nepse is one of the reform
measures being taken by the secondary market. It has already moved ahead
with the plan to provide bulk trading facility (BTF) for transactions
of 10,000 shares or more. Nepse has been holding discussions on this
issue with the stakeholders.
Thapaliya said that after the creation of a place for market makers,
institutions like the Citizen Investment Trust (CIT) could get involved
in this role. The government had asked the CIT to act as a market maker
when the capital market hit rock bottom two years ago.
A committee formed by the CIT and led by Nawaraj Adhikari, an official
of the Securities Board of Nepal (Sebon), had recommended mobilizing a
fund of Rs 4 billion to enable it do its job of stabilizing the market.
The committee had also said that an independent and autonomous unit
should be formed within the CIT to function as market maker. The Finance
Ministry and other government entities including the Employees’
Provident Fund, CIT, Insurance Board, Rastriya Beema Sansthan, Nepal
Telecom and Sebon had pledged to contribute to the fund.
The committee has advised the CIT to purchase securities of companies
with a good net worth and high earning per share in order to minimise
losses.
In the changed context with the market in a bullish mood, the CIT has
felt the need for some mechanism where its investment would not be
wasted. “There might be manipulation of the stock market by some big
players when we try to buy or sell stocks,” said a CIT official. “It
will be a risky investment, and there is concern that anti-graft bodies
like the Commission for Investigation of Abuse of Authority may take
action against bad investment decisions.”
However, another senior CIT official Sushil Aryal said that the issue
of being a market maker was under discussion at the CIT board currently.
To become a market maker, there is a long procedure which should be
followed as per the Securities Businessperson (Stock Broker, Securities
Dealer and Market Maker) Regulations 2008.
The procedure is similar to what stock brokers are required to follow
as per Sebon rules. According to the regulation, prospective market
makers have to pay Rs 8,000 as application fee, Rs 60,000 as licence fee
and Rs 40,000 as annual fee.
As per the regulation, market makers can purchase and sell securities
on their own account. They can quote the buying and selling prices of
securities and purchase and sell them on their own account as market
maker. They can also get engaged in the work of underwriting securities.
Banks and financial institutions can work as market makers by creating
subsidiary institutions, according to the regulation.
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