Share traders will get one-window service — from placing orders to settling the shares traded — provided the central depository system does not hit yet another snag to begin operations.
Brokers have started applying for licence to work as depository participants (DPs) as the regulator has started work on amending Central Depository Service Regulation 2010. Securities Board of Nepal has agreed to reduce net worth requirement for a DP to obtain licence from Rs 10 million to Rs five million to incorporate stock brokers. A DP holds demat shares on behalf of shareholders in their respective accounts acting as a bank of demat shares.
“Brokers have started the process to obtain licence for DPs even before the amended regulation has come into effect,” informed Narendra Raj Sijapati, president of Stock Brokers’ Association of Nepal, adding that all interested brokers will obtain licence to work as DP by the end of the current fiscal year.
“After brokers begin DPs’ work and CDSC starts its automated settlement and clearing of dematerialised shares, share traders will get a one-window facility to sell or buy shares as they will not have to go to different places for placing orders, verifying share possession and settling the transaction,” pointed out Sijapati.
A broker who is also a DP will take the buy or sell orders, then execute the orders and transfer the shares as per the order in a few steps. “But if brokers are not DPs, then trading will take a longer period because a broker has to make sure that the seller’s demat account has the offered number of shares, which is why we were asking the regulator to reconsider the regulations,” he said.
Brokers will also work as clearing members of CDSC that will electronically transfer dematerialised shares belonging to investors stored in demat account at DPs. “All the 50 brokers will be ready to start undertaking the role of clearing members by next week as we’ll be provided required bank guarantee within a few days,” said Sijapati,However, brokers will have limited capacity to hold demat shares due to their small capital size in comparison to banks and merchant bankers that can function as DPs. According to regulations, DPs can only hold shares worth 500 times their net worth on behalf of the beneficial owners.
CDSC’s operation will remove the necessity of holding physical scrip for share trading, which is causing delay in share settlement for months at present. CDSC will electronically clear and settle dematerialised shares traded at Nepal Stock Exchange and make share transfer swifter and punctual.
Although the company has been fully equipped to handle the clearing and settlement of demat shares since one year, things have failed to take off. The depository had successfully carried out settlement and clearing of a few shares as a test last April. However, absence of registered companies and demat shares is still posing as a roadblock. There are mere 6,392 unit shares held in demat accounts of their owners, while only 16 listed companies have registered their shares to get dematerialised.
CDSC is preparing to impose a six-month deadline for all listed companies to get their shares dematerialised after starting real time operations.
source: the himalayan times,28 march 2014
LINK
Brokers have started applying for licence to work as depository participants (DPs) as the regulator has started work on amending Central Depository Service Regulation 2010. Securities Board of Nepal has agreed to reduce net worth requirement for a DP to obtain licence from Rs 10 million to Rs five million to incorporate stock brokers. A DP holds demat shares on behalf of shareholders in their respective accounts acting as a bank of demat shares.
“Brokers have started the process to obtain licence for DPs even before the amended regulation has come into effect,” informed Narendra Raj Sijapati, president of Stock Brokers’ Association of Nepal, adding that all interested brokers will obtain licence to work as DP by the end of the current fiscal year.
“After brokers begin DPs’ work and CDSC starts its automated settlement and clearing of dematerialised shares, share traders will get a one-window facility to sell or buy shares as they will not have to go to different places for placing orders, verifying share possession and settling the transaction,” pointed out Sijapati.
A broker who is also a DP will take the buy or sell orders, then execute the orders and transfer the shares as per the order in a few steps. “But if brokers are not DPs, then trading will take a longer period because a broker has to make sure that the seller’s demat account has the offered number of shares, which is why we were asking the regulator to reconsider the regulations,” he said.
Brokers will also work as clearing members of CDSC that will electronically transfer dematerialised shares belonging to investors stored in demat account at DPs. “All the 50 brokers will be ready to start undertaking the role of clearing members by next week as we’ll be provided required bank guarantee within a few days,” said Sijapati,However, brokers will have limited capacity to hold demat shares due to their small capital size in comparison to banks and merchant bankers that can function as DPs. According to regulations, DPs can only hold shares worth 500 times their net worth on behalf of the beneficial owners.
CDSC’s operation will remove the necessity of holding physical scrip for share trading, which is causing delay in share settlement for months at present. CDSC will electronically clear and settle dematerialised shares traded at Nepal Stock Exchange and make share transfer swifter and punctual.
Although the company has been fully equipped to handle the clearing and settlement of demat shares since one year, things have failed to take off. The depository had successfully carried out settlement and clearing of a few shares as a test last April. However, absence of registered companies and demat shares is still posing as a roadblock. There are mere 6,392 unit shares held in demat accounts of their owners, while only 16 listed companies have registered their shares to get dematerialised.
CDSC is preparing to impose a six-month deadline for all listed companies to get their shares dematerialised after starting real time operations.
source: the himalayan times,28 march 2014
LINK
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