KATHMANDU, MAY 8, 2012
The commodities market is suspected to be engaging about one-third of the total market capitalisation of Nepse as an investment. The commodities market of Nepal consists of six commodity exchanges, 20,000 investors, 200 brokers and 400 sub-brokers, according to the interim report submitted by a study team which was assigned to conduct a research on the country’s commodity market.
The capital market though has only one stock exchange, 47 brokers and 300,000 investors and handles daily transactions worth Rs 10 million on average. The active investors engaged in stock trading and frequent secondary transaction, however, is estimated to be as less as 15,000.
“Though the actual amount is yet to be calculated, the initial draft suggests that the overall money involved in the commodities market could be as high as Rs 100 billion,” pointed out an official closely associated with the study at Securities Board of Nepal (Sebon), which has been commissioned to undertake the role of a regulator of the commodities market.
Nepse’s market capitalisation stands at Rs 381 billion with 215 companies and around 25 types of bonds listed. “The size and amount of money that appears to be involved in the market signals the urgent need to bring them under a regulatory net else a huge financial disaster is round the corner,” said the official.
The High Level Financial Coordination Committee had asked the capital market regulator to conduct a detailed study in order to draft the regulation. The study committee that has already submitted the first draft is supposed to submit its final report by mid-May.
Based on the findings of the study, Sebon and concerned regulators will design the regulation. Sebon is seeking to amend the Securities Act-2063 to include the commodities market to regulate it. Despite handling such a huge amount of public’s money, there are no regulations in place, thus drafting a law to bring them under some control as soon as possible is an imperative.
“There is no regulation or guideline that protects the interest of the investors who have been investing through these exchanges in different commodities trading making their situation extremely vulnerable,” he pointed out. These exchanges have started their businesses by only obtaining a licence from Company Registrar’s Office under the Company Act.
“The Company Act is extremely vague and is not strong enough and has left the regulation and supervision to respective regulators that govern specific companies,” he added. The commodity exchanges that had requested the government for a regulator time and again had initially refused to cooperate with the study.
“Their hesitation in sharing information has raised suspicion that they could be involved in deals that are not in the interest of the investors,” said the officer. The huge size of the commodities market on one hand and the relatively smaller capacity of Sebon on the other has even raised questions whether the capital market regulator will be able to effectively regulate the technically mind boggling and complicated market.
Source: THT
The commodities market is suspected to be engaging about one-third of the total market capitalisation of Nepse as an investment. The commodities market of Nepal consists of six commodity exchanges, 20,000 investors, 200 brokers and 400 sub-brokers, according to the interim report submitted by a study team which was assigned to conduct a research on the country’s commodity market.
The capital market though has only one stock exchange, 47 brokers and 300,000 investors and handles daily transactions worth Rs 10 million on average. The active investors engaged in stock trading and frequent secondary transaction, however, is estimated to be as less as 15,000.
“Though the actual amount is yet to be calculated, the initial draft suggests that the overall money involved in the commodities market could be as high as Rs 100 billion,” pointed out an official closely associated with the study at Securities Board of Nepal (Sebon), which has been commissioned to undertake the role of a regulator of the commodities market.
Nepse’s market capitalisation stands at Rs 381 billion with 215 companies and around 25 types of bonds listed. “The size and amount of money that appears to be involved in the market signals the urgent need to bring them under a regulatory net else a huge financial disaster is round the corner,” said the official.
The High Level Financial Coordination Committee had asked the capital market regulator to conduct a detailed study in order to draft the regulation. The study committee that has already submitted the first draft is supposed to submit its final report by mid-May.
Based on the findings of the study, Sebon and concerned regulators will design the regulation. Sebon is seeking to amend the Securities Act-2063 to include the commodities market to regulate it. Despite handling such a huge amount of public’s money, there are no regulations in place, thus drafting a law to bring them under some control as soon as possible is an imperative.
“There is no regulation or guideline that protects the interest of the investors who have been investing through these exchanges in different commodities trading making their situation extremely vulnerable,” he pointed out. These exchanges have started their businesses by only obtaining a licence from Company Registrar’s Office under the Company Act.
“The Company Act is extremely vague and is not strong enough and has left the regulation and supervision to respective regulators that govern specific companies,” he added. The commodity exchanges that had requested the government for a regulator time and again had initially refused to cooperate with the study.
“Their hesitation in sharing information has raised suspicion that they could be involved in deals that are not in the interest of the investors,” said the officer. The huge size of the commodities market on one hand and the relatively smaller capacity of Sebon on the other has even raised questions whether the capital market regulator will be able to effectively regulate the technically mind boggling and complicated market.
Source: THT
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