Nepal Share Market - The History of Securities market in Nepal

History of NEPSE (Nepal Stock Exchange)

The Securities (Share) history in Nepal starts when Biratnagar Jute Mill (which is biggest and oldest  jute mill in Nepal established under Prime Minister Juddha Shamsher Rana in 1936) and Nepal Bank Limited ( The beginning of the era of formal banking in Nepal inaugurated on Kartik 30, 1994 by His Majesty King Tribhuvan) floated their shares in the Nepali market. These two companies floated their shares first time in 1937. There were very few Companies in Nepal issuing shares to the general public until another Company Act came into operation. After almost 24 years, the company act was introduced in the country in 1964. The Government Bond was also issued for the first time in Nepal in the same year. In 1965, 3% compensation Bonds with a maturity period of 10 years were issued for the acquisition of Birta Land and 1% Compensation Bonds with a maturity of 20 years issued for the acquisition of private forests. Non-interest bearing Prize Bonds of Rs861 thousand were also issued to individuals in 1969. Altogether 36 public enterprises were established through subscription of shares under the companies Act during 1960 - 1975.

After that, Nepal realized the need of securities Exchange Center to facilitate and promote growth of capital markets in the country. Several discussions were made one by one from the Government side as well as private side to finalize the modality of Exchange Center. In 1973, with the initiation of Nepal Government and Nepal Rastra Bank, securities Exchange Center Limited was established under the companies act. At the very beginning time, responsibilities of Securities Exchange Center were limited to undertake brokering, underwriting, managing public issues, creating markets for Securities and government Bonds. Institutional development of securities market in Nepal started from the year 1976 when Securities Exchange Centre (SEC) was established under the Companies Act with the joint capital contribution of Nepal Rastra Bank and Nepal Industrial Development Corporation.

Institutional development of capital market in Nepal started after the establishment of Securities Exchange Center (SEC). The Industrial Policy of the government also encouraged the promotion of securities exchange in Nepal. Nepal government under a program initiated to reform capital market converted Securities Exchange Center (SEC) into Nepal Stock Exchange (NEPSE) in 1993 as nonprofit organization under Securities Exchange Act 1983. Similarly in the same year Securities Board of Nepal (SEBON) was also established by government of Nepal in June 7, 1993 as an apex regulatory body of Securities Markets. SEBON regulates the market under the Securities Act, 2006. Since the establishment of SEBON, it has been concentrating its efforts on the legal and statutory frameworks such as providing advice to Government on matters related with the development of capital markets, register the securities of public companies, issue necessary securities regulations and directives, issue license to operate stock exchange etc. Nepse has been working under the jurisdiction of the SEBON.

Introduction of Nepse (Nepal Stock Exchange)

Along with the formation of Security Exchange Board, His Majesty's Government converted the Securities Exchange Centre Ltd. into Nepal Stock Exchange Ltd. (NEPSE) in 1993 with a view to reform the capital market. Nepal Stock Exchange (NEPSE) opened its trading floor on 13^th January 1994 after establishing under securities Exchange Act, 1983. Currently, NEPSE is the sole secondary market for listed securities of Nepal. It works in the issue and redemption of securities and other financial instruments and capital events such as payments of income and dividends. The Board of Directors consists Nine directors in accordance with Securities Exchange Act 1983. Six directors are nominated by Government of Nepal and rest of the directors are from different institutional investors. The shareholder ownership structure of NEPSE comprises of Government of Nepal, Nepal Rastra Bank, Nepal Industrial and Development Corporation and Members. After well establishment of Nepse, Public sentiment towards the corporate shares was so strong that the prices of equity share of most of the companies, especially shares of companies in the banking and finance sector went up abruptly. 

Introduction of SEBON

Securities Board of Nepal (SEBON) was established on June 7, 1993 as an apex regulator of Securities Markets. SEBON regulates  the market under the securities Act, 2006. SEBON has the power to regulate and manage the activities of the securities markets and persons involved in the business of dealing in securities by regulating the issuance, purchase, sale and exchange of securities for the purpose of protecting the interests of investors in securities. The Governing Board is composed of seven members including Full time Chairman appointed by the Government for tenure of 4 years, Joint Secretary Ministry of Finance, joint secretary of Ministry of Law, justice and Parliamentary affairs, representative from NRB, representative from Institute of Chartered Accountants of Nepal, representative from federation of Nepalese Chambers of Commerce and Industries and one member appointed by the Government from amongst the experts pertaining to management of securities market, development of capital market, financial or economic sector. The major financial sources of SEBON are the government grant, transaction fee from the stock exchange and registration fee of corporate securities.