Economy

Nepse confident to begin CDS by April

Published by Octron on January 21, 2011

Central Depository System (CDS) and Clearing Company is all set to start its operation by April. “The software developers have already completed the software for CDS and are working on trading and settlement software,” said Shankar Man Singh, managing director (MD) and chief executive officer (CEO) of Nepse. “Even after the completion of the software, User Acceptance Test (UAT) of the software alone will require more than one month,” he said, adding that as the second phase of CDS implementation, Nepse will launch online trading. “So that the investors can place buying and selling order from their houses without having to go to the brokers,” he added. This CDS company with a paid-up capital of Rs 300 million is being established from the support of Indian grant that has also been capitalised as equity. The grant worth Rs 147.2 million from India has been used to procure software for the system.

CDS is supposed to boost the transaction in the secondary market as the system will bring in swift ownership transfer. “CDS will make the share distribution after initial public offerings (IPO) of the companies faster,” said Niraj Giri, director of Securities Board of Nepal (Sebon) ¿ the capital market regulator. “Investor identification is the most time consuming procedure during share distribution, but after the CDS comes into implementation investors’ data will be available in the system and the distribution could be done within 15 days,” he explained.

At present, it takes about two months for the share ownership transfer after the order placement thus it is very difficult for the investor to sell the shares immediately after the purchase, according to Nepse. “Under the CDS, the transfer will be undertaken within minutes so that shares can be changed through multiple hands in a single day which will increase the transaction volume.” CDS will replace the current practice of physically holding and moving the scrip of shares by a safe and dependable computerised book entry system. The seller’s account will be debited and the buyer’s account will be credited when shares are traded. CDS will also bring instant share liquidity in the market. Thus, the implementation of CDS is supposed to wipe out inconsistency and manipulation in stock trading making the secondary market more transparent.

Source: THT

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