After receiving the direction from Securities Board of Nepal (SEBON) to provide broker licence to commercial banks, Nepal Stock Exchange (Nepse) and CDS and Clearing Ltd (CDSC) have started to do homework for the same.
On July 15, SEBON — the secondary market regulator — had directed Nepse to provide broker licence to the banks’ subsidiary companies as per the recommendation made by a team of experts formed by the Ministry of Finance last year.
Chandra Singh Saud, chief executive officer of Nepse, said they have already initiated the homework for issuing the broker licence to the subsidiary firms of commercial banks. “We have formed a dedicated team for the purpose and very soon we will be providing such licence to the banks.”
In December last year, a team of experts led by Nepal Rastra Bank’s Deputy Governor Shiva Raj Shrestha had suggested that banks should be allowed to establish subsidiary brokerage firms.
Then in January, SEBON carried out a study to implement the recommendation made by the experts’ team.
SEBON has also directed Nepse to conduct a study on ways to make stock market circuit breaker more contextual.
It has also asked Nepse to come up with measures to discourage activities that affect the capital market and lead to fluctuations in the stock index.
As per Saud, Nepse has already conducted an in-depth study on the feasibility of providing broker licence to the subsidiary companies of banks. “We will be issuing the licence to the banks soon,” he added.
As per the direction of SEBON, before issuing the broker licence, Nepse needs to determine the number of subsidiary companies of commercial banks, minimum capital of such firms, necessary human resources, physical infrastructure, and their number of branches across the country, among others.
For outside the Valley, Nepal Stock Exchange and commercial banks will have to jointly determine financial feasibility before its establishment.