A high-level Financial Sector Coordination Committee, headed by Finance Minister Barshaman Pun, on Friday decided to form an expert panel within a week that will undertake the study the functioning, status, contribution to economy, and problems of the commodities markets in the country.[break]
The proposed Act, which was drafted a couple of years ago, is still to be endorsed by Parliament as it is gathering dust in the Ministry of Law and Justice, which is studying the final draft proposed by the Ministry of Finance recently.
"We have decided to immediately conduct a study of the commodities markets operating in the country and seek measures to properly regulate them at a time when their status is still unclear in the absence of a regulatory mechanism," Babu Ram Shrestha, chairman of Sebon, told Republica on Sunday. Sebon is preparing a roster of possible experts on commodities markets to be included in the study panel.
Shrestha said the team will collect detailed information about the market, promoter of commodities market operators, status of investors, comparative study with such markets in other countries, contribution of the derivative and future markets to the economy, existing technology applied, existing problems and challenges as well as solutions to tackle the problems in the market.
"The team will be mandated with presenting the status of commodities markets, existing challenges and problems as well as recommending to Sebon the measures necessary to regulate the market after a thorough study of the practices even in other countries," said Shrestha.
More than six derivative companies are operating in the country with daily transactions from Rs 100 million to Rs 150 million. Deepening slowdown in reality business and stock market for last couple of years have led to a rise in the number of investors in commodities markets that have seen over 12,000 investors, a sharp rise compared to some years back.
Dipendra Kumar Khatiwada, managing director of Mercantile Exchange Nepal Ltd, said disinterestedness of banks to involve themselves as facilitators in the commodities markets, lack of necessary infrastructure such as warehouse to handle the agro-based commodities, and trend of blindly investing without analyzing the market situation are major problems in the derivative markets in Nepal.
No application for DP for CDS
Central Depository System (CDS) - an online-based trading system - couldn´t be introduced from Sunday as announced by the Securities Board of Nepal (Sebon) as no application was registered by any company seeking permission from the capital market regulator to work as Depository Participant (DP) - a mediating company in share transaction under the CDS system.
"We have not received application from any company seeking permission from Sebon to work as DP. Process to enforce the CDS in Nepal Stock Exchange (Nepse) will be delayed further till companies show interest in this regard," said Neeraj Giri, spokesperson of Sebon.
Stock brokers are opposing the criteria for DP that requires the interested company to have a net worth od more than Rs 10 million and are shying away to register their applications to work as DP. According to Giri, all 10 stock brokers who submitted their financial statements to Sebon so far have net worth of more than Rs 10 million.
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