KATHMANDU, July 21: The government has reduced brokerage commission for trading of share and securities in the stock market.
Ministry of Finance (MoF) on Wednesday approved the new commission rates proposed by the Securities Board of Nepal. The commission rates have been nearly halved from the existing rates.
Brokerage commission for transaction of shares up to Rs 50,000 has been brought down to 0.6 percent from existing 1 percent. Similarly, commission for transaction between Rs 50,000 and Rs 500,000 have been reduced to 0.55 percent from 0.9 percent.
The new rates, however, will come into effect only after Nepal Stock Exchange (Nepse) after Nepse enforces it.
Investors buying or selling shares of listed companies worth between Rs 500,000 and Rs 2 million will have to pay 0.5 percent of the transaction amount as brokerage commission. Existing commission rate for transactions between Rs 500,000 and Rs 1 million is 0.8 percent.
After the new rates come into effect, investors buying or selling shares of listed companies worth between Rs 2 million and Rs 10 million will have to pay 0.45 percent as brokerage commission. Likewise, investors will have to pay brokerage firm 0.4 percent brokerage commission for transaction above Rs 10 million.
The decision to bring down brokerage charges has come in the wake of complaints from the investors that such commission was the highest in South Asia.
"The rates had not been reviewed for the last eight years. Implementation of automated trading system has nearly doubled turnover in recent days. We decided to review the rates and bring it down so that the transaction costs become cheaper," Rewat Bahadur Karki, chairman of Sebon, said. “The commission rate was the highest in South Asia. We decided to reduce the rate also to encourage investors to come to the market and provide more liquidity," he added.
Sebon has also directed Nepse to immediately enforce the new brokerage commission rates.
Investors have welcomed the decision, saying that it will provide additional financial incentive for trading. "Albeit late, the commission is coming down. This is a huge relief for the investors, who were being charged exorbitantly by the brokerage firms," Durga Uprety, treasurer of Nepal Investors Forum, said. "This will also increase the trading volume in the market.”
The brokerage charges on other securities have also gone down. Brokers say that rise in transaction volume can offshoot the declined commission rates. "Though decline in commission reduces our income directly, the lower commission rate will increase transactions and attract new investors which can counterbalance our revenue," Gunanidhi Bhusal, managing director at Aryatara Investment and Securities -- a stock brokerage firm.