1.PRESENTATION ONSECURITIES MARKET MECHANISM IN NEPAL TEAM MEMBERS: PAWAN KAWAN BIKASH SAPKOTA SANGITA ADHIKARI RANJITA SAPKOTA SUNITA BARNAWAL

2. Security Market: Background Securities: Negotiable instrument representing financial value Security Market: Mechanism where securities are traded Types of security market I.Primary Market II. Secondary Market Quote Driven Market Order Driven Market Historical Background: In 1602 the Dutch east India Company issued the first share on the Amsterdam stock exchange India was the first country to start trading of securities in Asia 3. Major Securities Market New York Stock Exchange London Stock Exchange Established in 1817By 2010 in 1801 Foundedthere are 2317 companies listedBombay Stock Exchange It has December 2010, the of US$ 13.39 trillion on Dec 2010 As of total market capture Exchange had a market capitalization of Established in 1875 World largestexchange in Asia US$3.6 trillion stock exchange Oldest stock Fourth largest stock exchangeAutomated Trading System (ATS) In 1999, the BSE installed the in the world (and the largest in Europe) market capitalization of listed companies is US$ 1.28 The total trillion as of Feb 2010 4. Security Market In NepalBackground of securities marketFlotation of shares by Biratnagar Jute Mills Ltd. and Nepal BankLtd. in 1937 Introduction of the Company Act in 1964,the first issuance of Government Bond in 1964 andthe establishment of Securities Exchange Center Ltd. in 1976 Converted Securities Exchange Center into Nepal StockExchange in 1993Order driven marketSEBON 5. Primary Market In NepalInvestment Banker In Nepal Investment banker is known as Merchant Banker Financial professional who helps companies and governmentorganizations in acquiring capital Merchant Banker involves sale of security to the public 6. Merchant Bankers in NepalS. N. Merchant Bankers 1. NSM Merchant Banking Ltd. 2. NCM Merchant Banking Ltd. 3. Investment Management Merchant Banker Ltd. 4. Growmore Merchant Banker Ltd. 5. Citizen Investment Trust 6. NABIL Investment Banking Ltd. 7. Vibor Capital Ltd. 8. Civil Capital Market Ltd. 9. Ace Capital Ltd. 10.Beed Invest Ltd. 11.NMB Capital Ltd. 12.Elite Capital Ltd. 13.Laxmi Capital Market Ltd. 14.Araniko Capital Management Company Ltd. 7. Securities Issue Process In Nepal1. Company Decision2. Appointment of Issue Manager3. Prospectus Preparation4. Filling with the companys information about Includes SEBON5. SEBONs review by the Prospectus Vetting Committee capital, financial of SEBON situation,There are member representingmanagement,6. Clarification/UpdateSEBON, promoters & directors, andinvolving7. Prospectus Approval by SEBON Nepal Rastra Bank, Stock exchange,future prospectus Insurance Board and company registrars Office 8. Securities Issue Process In Nepal(contd)8. Issue Open and Issue Close Issue should open within 29. Allotment andshould bemonths of prospectus approval AnnouncementsRefundingpublished at least 7 days before the issue open.Number of applicationsTime for refund . Applications shall be accepted for a minimum period of five and maximum of 15 working days from the date of openingUp to 100,000 40 days 100,001 to 200,000 50 days 200,001 to 300,000 60 days 300,001 and above70 days 9. Secondary Market In NepalNepal Stock Exchange Located at Singha Durbar Plaza, Kathmandu, NepalOpened its trading floor 13 January, 1994 Government of Nepal, Nepal Rastra Bank, NepalIndustrial Development corporation and members are theshareholders of NEPSE 204 listed companies at present 10. Listed Companies In NEPSE2 21 Bank and finance 4 4 Hotel18 Manufacturing and processing Hydro power4 Trading Insurance 151 Others 11. Trading System of Nepal Stock ExchangeOpen cry out system Buyer A Seller C SELLER BUYER Broker Broker Transaction hall of NEPSE 12. Automated trading mechanism Introduced fully automated screen based trading since 24thAugust, 2007 The NEPSE trading system is called NEPSE AutomatedTrading System (NATS) Adopts the principle of an order driven market Aided by Asian Development Bank 13. Major features of Automated Trading Mechanism Client Management Order Price Execute at Retain until Condition Market Depth Settlement Blank Transfer Ownership transfer Circuit Breaker 14. Trading Days and HoursTypes of trading DaysTrading timeGovernment security trading Sunday to Thursday 11 AM. to 12Regular trading Sunday to Thursday 12 A.M. to 3 P.M.Odd Lot Trading Friday 11 A.M. to 12 Noon 15. Brokerage CommissionBrokerage Commission for equity:S. No.Trading Amount Brokerage% AUp to 50,000 1 B>50,000 & 5,00,000 & 10,00,0000.7Brokerage commission for Government Bond:S. No.Trading Amount Brokerage % A Up to 5,00,000 0.20 B>5,00,000 & 50,00,0000.5 16. Brokerage Commission(Contd)Brokerage commission for all other stocks exceptequity and government bonds: S. No. Trading Amount Brokerage % AUp to 50,000 0.75 B>50,000 & 50,00,000 0.40 17. RECENT REFORM IN NEPSE Secondary trading of government Bond Started OTC market Trading of Promoters shares Establishment of Central Depository System Sensitive Index and float Index Introduced Trading from out of kathmandu valley Recommendation to add new brokers Real time information dissemination and online trading 18. Comparison of Nepalese security market with South Asian and Global context:BasisNewYork StockSouth Asian Nepalese Exchange Security Market ( Security MarketReffering BSE )Initiation Around 17thAround 200years Late start around centuryago from Britishin 1937RegimeSize(on the basis of Huge marketMediumSmallmarket coverage)Efficiency Highly efficient adopting theIs in infant stage of market efficiencyadopting efficiency .Regulatory SystemThe U.S Securities SEBI, SEC etc.SEBON and Exchange Commission(S.E.C)Automated TradingAll the trading is Has ATS in almost all Nepalese securitysystem based in Automated South Asian countries market is also based trading system.on ATS and screenbased trading. 19. Contd .TechnologyHighlyHas a good Slowadaptationsophisticated technology adaptation oftechnologybase technologyParticipation All types ofDominated by Commercialorganizationbanking sectorsbanks participation is vastSettlementFollows T+1 and Follow T+2 rolling Follows T+3procedure real time trade settlement rolling settlementsettlementprocedureprocedureprocess 20. Factors affecting the stock marketForeign direct InvestmentInflation And DeflationForeign MarketsGlobalizationEarnings and Emotions (2Es) 21. Shortcomings of Nepalese security market Lack of experts Lack of credit rating agency Lack of institutional investors participation in transaction Restrictions for Foreign Direct Investment Foreign securities are restricted in NEPSE 22. Conclusions:Conclusions Order driven security market Bank based security market Open Cry out system has been replaced by automatedtrading system Lack of proper regulatory system and credit ratingagency Value weighted index Lack of public awareness towards security and itstrading