Demat trading of shares of seven companies to begin April 19

KATHMANDU, March 31: Nepal Stock Exchange (Nepse) has decided to completely replace paper-based securities trading with electronic trading from April 19.

The electronic trading of shares, however, will be enforced only on seven listed companies in the first phase.

Issuing a statement on Tuesday, Nepse said shares of Global IME Bank, Himalayan General Insurance Ltd, Shikhar Insurance Company Ltd, Everest Finance Ltd, Unilever Nepal Ltd, Mahalaxmi Finance Ltd and Taragaon Regency Hotel will be traded only in dematerialized form from April 19.

Central Depository System and Clearing Ltd (CDSCL), a subsidiary of Nepse, had enforced dematerialized shares trading for all companies of banking group from the first week of October last year. Under the new system, buyers are getting shares only in dematerialized forms. Now, both buyers and sellers of stocks of these seven companies will have to do trading in dematerialized form.

Nepse has also made it mandatory for the buyers to provide their Beneficiary Owner Identification Number (BOID) while purchasing dematerialized shares in the market from April 5 onwards. This means prospective buyers will have to open his/her demat account from depository participant to provide the while placing purchase order with the broker.

Nepse officials say the requirement will compel investors to seek BOID by opening account with depository participants.

Only around 29,705 demat accounts have been opened so far, according to CDSCL. It is estimated that there are around one million investors in the secondary market.

Though the electronic trading of shares was expected to come into full-fledged operation some two years ago, it couldn't materialize due to various reasons including the reluctance of the listed companies to get membership of CDSC and register their shares for dematerialization. Only 91 of the 246 listed companies have registered themselves with the CDSCL so far. According to CDSCL, 44 other companies are in the pipeline for admission of their securities.

Meanwhile, Nepse has restricted clients from putting stocks in the blank transfer for more than 15 days.

Blank Transfer refers to stock which neither has name of transferee nor the date of sale. The transferee is at liberty to sell it again without filling up his name and signature to a subsequent buyer. Such practice in the stock market provides the opportunity to the investors for the trading within a short time by avoiding the lengthy ownership transfer process.

According to the newly introduced provision, investors will have to sell the stock that they hold in the blank transfer within 15 days. "If such stocks are not sold, it should be sent to the Registrar of Shares to receive share certificates or deposited in the demat account," the statement added.

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