KATHMANDU, March 12: The Securities Board of Nepal (SEBON) has started homework to revise the rule of circuit breaker in the secondary market amid ongoing criticism for the existing rule for creating hurdles in the smooth operation of share trading.
SEBON Chairperson Santosh Narayan Shrestha informed that the sector’s regulator has been looking forward to changing the rules in line with recommendations given by a panel formed by the government six months ago. Following the market crash on the first trading day after the Gen Z movement of September 8-9, Finance Minister Rameshore Khanal, on September 19, formed a four-member task force to recommend systemic and procedural reforms aimed at restoring investor confidence.
The task force led by Rupesh KC, acting executive director of the SEBON, forwarded the government with over three dozen measures for the improvement of performance of the country’s secondary market. In its long-term recommendations, the panel called for separate specialized laws for securities market regulation, investor protection and trust management. as well as measures to bring Nepal Stock Exchange (NEPSE)’s trading system in line with international standards and facilitate trading of government and corporate bonds.
Circuit breaker applied for second time at NEPSE on Sunday
The sector’s regulator has raised its concern also after facing heavy criticism from the investors regarding the existing rules of circuit breaker. On Monday, the first trading day after the recently held general election, the NEPSE witnessed three successive circuit breakers, while the authority closed the trading within just one hour.
Rajan Pradhan, a share market investor, said it is not fair that the regulator stalled trading in the name of circuit breaker rules. “How does it help boost investors’ confidence if the market is disrupted during its inclining graph,” the investor told Republica.
According to an official of the SEBON, high level officials of the board and NEPSE held a meeting to discuss the issue on Tuesday. “Most of the participants have sought to impose circuit breakers based on the float index rather than the entire NEPSE index,” said the source.
Circuit breaker refers to a regulatory measure to either halt or suspend the trading of stocks in the market when their prices swing massively. In addition to circuit breakers of particular stock, NEPSE also imposes the index-based circuit breaker.
Under the rule share transactions are suspended for 20 minutes if the index crosses the 20 percent limit for the first time in a day during trading hours. In case of a 5 percent rise or fall in share prices, trading is halted for 40 minutes. Trading is halted for the rest of the day if the index fluctuates by 6 percent.
Last time, the SEBON revised the rules of circuit breakers in April 2019, adopting flexible measures in this regard. SEBON’s Chairperson Shrestha added that more flexible measures have been sought this time, aiming to boost investors’ confidence.
