Sebon prepares to cut down transaction cost, time

KATHMANDU, Feb 9: Securities Board of Nepal (Sebon) is coming up with measures to simplify stock market transactions including bringing down transaction cost and settlement period. In a free fall, Nepal Stock Exchange (Nepse) index has slipped to six-year low in recent days.



Sebon - the security market regulator - has recently conducted a preliminary study to fix the causes of persistent downtrend in the stock market. [break]



A team led by Sebon director Nawaraj Adhikari recently submitted a preliminary report that indicates that high cost of transaction due to different tax liabilities and delay in settlement of transactions are the major factors discouraging prospective and existing investors.



“We have started to conduct a fresh study to determine by what extent transaction cost and time can be reduced. We will devise a set of measures in a couple of weeks to them bring down,” Baburam Shrestha, chairman of Sebon, told Republica on Wednesday. Investors have to wait for at least two weeks to get their share transactions settled in the secondary market.



As per the current provisions, stock brokers can collect one percent commission from investors for transaction amount up to Rs 50,000, 0.9 percent for transaction between Rs 50,000 and Rs 0.5 million, 0.8 percent for transaction amounting from Rs 0.5 million to Rs 1 million and 0.7 percent for transaction valued over Rs 1 million. Brokers pay 25 percent out of the total commission charged from the clients to Nepse as royalty.



Similarly, Sebon has been charging 0.015 percent of the particular transaction amount in addition to Rs 5 as a charge for transfer of ownership from investors.



“Most investors said higher cost of production and lengthy process to settle transactions are the major problems that discourage investment in share market. So, we are thinking to review brokers´ commission, Sebon royalty, and Nepse royalty,” said Shrestha.



Rabindra Bhattarai, a share analyst, said, “Investors have to see higher cost of transaction once the Central Depository System (CDS) is introduced as online trading system requires extra charge to be paid by customers with the addition of new services. Hence, it is high time the government took measures to drag down the cost of transaction immediately.”

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