The system is popular in secondary markets in various countries and helps improve transparency of transactions.
A committee comprising officials from Nepal Stock Exchange and Security Board of Nepal (SEBON) recently recommended to the Ministry of Finance that the CDS be set up as a subsidiary of NEPSE. The SEBON proposal says majority of shares in the CDS will be held by NEPSE.
Earlier, the Asian Development Bank had suggested three options for setting up the CDS — keeping it as a department under NEPSE or as NEPSE’s subsidiary or as a separate company with NEPSE holding majority shares.
“We have recommended to the government that the CDS be made a NEPSE subsidiary with 59 percent shares held by NEPSE’s entity be as a subsidiary of NEPSE with 59 percent ownership for NEPSE,” Shankar Man Singh, NEPSE general manager told myrepublica.com.
“The remaining ownership will be held by Citizen Investment Trust (CIT) and Credit Information Bureau (CIB).”
To speed up the process of CDS implementation the government is preparing to invoke Securities Exchange Act until the CDS Act is enforced.
To make the securities transactions more transparent and to simplify the ownership transfer, the government had announced in the current budget that it would complete legal process and develop infrastructure for implementing the CDS.
“We most formulate CDS Act sooner or later for the full-fledged implementation of CDS. However, we are invoking Clause 110 and 111 of Securities Act to pave the way for implementation until the CDS Act is formulated,” Singh said.
“A team from NEPSE is heading soon for Bombay stock exchange to acquire functional and technical requirement for CDS,” said Singh.
NEPSE has estimated that about Rs 80 million will be required to install CDS. NEPSE has set aside Rs 31 million for the purpose.
“We have hoped that the transaction will also go up by at least 50 percent with the implementation of the CDS,” Singh said.
Under the current system, investors have to wait for at least two or three weeks to have share ownership transferred.
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