Introduction :

The history of securities market began with the floatation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937. Introduction of the Company Act in 1964, the first issuance of Government Bond in 1964 and the establishment of Securities Exchange Center Ltd. in 1976 were other significant development relating to capital markets.
Securities Exchange Center was established with an objective of facilitating and promoting the growth of capital markets. Before conversion into stock exchange it was the only capital markets institution undertaking the job of brokering, underwriting, managing public issue, market making for government bonds and other financial services.
Nepal Government, under a programme initiated to reform capital markets converted Securities Exchange Center into Nepal Stock Exchange in 1993. Nepal Stock Exchange, in short NEPSE, is a non-profit organization, operating under Securities Exchange Act, 1983.
The basic objective of NEPSE is to impart free marketability and liquidity to the government and corporate securities by facilitating transactions in its trading floor through member, market intermediaries, such as broker, market makers etc. NEPSE opened its trading floor on 13th January 1994.
Government of Nepal, Nepal Rastra Bank, Nepal Industrial Development Corporation and members are the shareholders of the NEPSE.
Process to obtain membership of Stock Exchange :
Corporate bodies wishing to be member shall have to submit application in prescribed format within specified time along with certificate of incorporation, tax certificate, Memorandum of Association , Articles of Association and concerned Act, rules and regulations in the case of corporate body other than company after the incorporation and the projected B/S and PL A/C for the next three years, last three years audited financial statement, if the year of incorporation is less than three years, the B/S and A/C of investment in shares of subsidiary company or investment made in its parent company's share capital, details of share investment in any other company other than subsidiary, the name, address, number of shares subscribed and the amount invested by shareholders having more than 5% of the share capital need to be submitted.
Board of Directors :
The Board of Directors of NEPSE consists 9 (Nine) directors in accordance with Securities Exchange Act, 1983. Six directors are nominated by Government of Nepal and different institutional investors. Two from the licensed members and the General Manager of the NEPSE is the Ex-Officio Director of the Board.
Capital Structure:
The authorised and issued capital of the exchange is Rs.50 million. Of this Rs.30.41 millions is subscribed by Government of Nepal, Nepal Rastra Bank, Nepal Industrial Development Corporation and licensed members.
Members :
Members of NEPSE are permitted to act as intermediaries in buying and selling of government bonds and listed corporate securities. At present, there are 27 member brokers and 2 market makers, who operate on the trading floor as per the Securities Exchange Act, 1983, rules and by-laws.
Besides this, NEPSE has also granted membership to issue and sales manager securities trader (Dealer). Issue and sales manager works as manager to the issue and underwriter for public issue of securities whereas securities trader (Dealer) works as individual portfolio manager.
At present there are 11 sales and issue manager and 2 dealer (Secondary market).
Tenure of Membership :
The tenure of the membership is one year. The license should be renewed within 3 months after the closure of the fiscal year. If not, it can be done within another three months by paying 25% penalty.
Listing :
Trading on the floor of the NEPSE is restricted to listed corporate securities and government bonds. At present, 131 companies have listed their securities to make them eligible for trading. Besides this, NCM Mutual Fund enlisted its units to make them eligible to trade in the floor.
Listing Fee :
The listing fee and the annual fee to be paid by the listed company is based on the capital of the company.
Trading System :
NEPSE has adopted an “Open Out -Cry” system. It means transactions of securities are conducted on the open auction principle on the trading floor. The buying broker with the highest bid will post the price and his code number on the buying column, while the selling broker with the lowest offer will post the price and code number on the selling column on the quotation board. The market maker quote their bid and offer price on their own board before the floor starts. Once the bid and offer price match, contracts between the buying and selling brokers or between the brokers and market makers are concluded on the floor.
Trading days & hours :
NEPSE has fixed the trading days and hours during which the members are allowed to enter the floor to make the transactions.
Types of Trading
Days
Trading Time
Government Bond Trading
Sunday to Friday
10:30 A.M. to 11:30 A.M.
Regular Trading
Sunday to Thursday
12:00 NOON TO 2.00 P.M.
Odd lot Trading
Monday & Friday
2-3 Monday, 11 -12 Friday
Board lot :
NEPSE has fixed the board lot of 10 shares if the face value is Rs.100 or 100 shares if the face value is Rs.10. The transactions on regular trading should be done on at least one board lot. The transactions of less than 10 shares are permitted only on odd lot trading hours
Settlement :
NEPSE has adopted a T+3 system which means that settlement of transactions should be done within 5 working days following the transactions day. Settlement will be carried out on the basis of paper verses payment.
Brokerage :
The rate of brokerage on equity transactions ranges from 1 percent to 1.5 percent depending on the traded amount.