Market Watch

Online Share trading in the offing

Published by Octron on November 28, 2010

Nepal Stock Exchange (NEPSE) has planned to start online share trading after the installation of the Central Depository System (CDS). After the online trading starts, investors should not go to the office of stockbrokers for share purchase and sales. Investors will get share certificates in electronic version, according to NEPSE. Currently, though the shares are traded online, investors have to reach to the office of stockbrokers. With the commencement of the online trading, investors can make transactions from anywhere via internet, utilising the terminals of stockbrokers.

“For the purpose, we are planning to purchase software from CMC Company, which sold us the CDS software,” said Shankar Man Singh, general manager of NEPESE. Singh said online trading would be commenced with the beginning of the CDS Company. CMC, a subsidiary Indian conglomerate TATA, has developed the software for the major stock exchanges like National Stock Exchange and Bombay Stock Exchange in India. “Online trading is viable in Nepal,” said Paristha Poudel, director of the Securities Board of Nepal (SEBON). “However, some infrastructure should be developed.”

Stockbrokers also agree that the investors will be benefited from the online trading. “It will be easier for the investors to trade online,” said Nanda Kishore Mundada, president of the Nepal Stockbrokers Association. “Investors need not visit Stockbrokers’ office.” The model is based on online banking system, which provides online information regarding the amount of shares held by investors and trading. Similarly, it will be easier for listed companies to access the information of its shareholders. Apart from domestic investors, the online trading will also facilitate foreigners to invest in Nepali stock market. The annual budget 2010/11 has focused on allowing the Non-Resident Nepali (NRN) in the domestic capital market. “We will entertain the NRNs after the commencement of CDS Company,” said Singh. “We will enter the data of all NRNs, who have acquired the identity of NRN, before commencing the CDS Company.” The installation of CDS is essential to facilitate the online trading. CDS has been operating in India since 1996. Currently, foreign investors, apart from the Non Resident Indians, are investing in the Indian stock market.

“The domestic market’s size will be expanded, if we let the foreigners to invest,” Mundada said. “Investors from South Asian Region should be included in the online trading.” Stock Analysts believe that the volume of trading will be ten times than the present level after the start of online trading. Similarly, the feasibility report of the NEPSE also revealed that the trading will be doubled within six months of the beginning of CDS. The burden of physical record keeping, clearance and settlement of share trading will decrease after the installation of CDS. It will further enhance the distribution of bonus shares and cash dividends.

Source: THT

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