Nepal Securities Board introduced the Securities Listing and Trading Regulation for Small and Medium Enterprises (SMEs) on Magh 3, 2081. The goal was simple: encourage small and medium companies to enter the stock market.
According to the plan, companies with paid-up capital up to Rs 25 crore were expected to issue IPOs under this new rule. But even after 10 months, not a single SME has been able to start the IPO process. The main reason is that the required bylaw has still not been approved.
SEBON had asked NEPSE to prepare the bylaw needed to implement the new rule. NEPSE has already drafted it and submitted it to its board of directors. However, the board has not passed it yet.
NEPSE’s management submitted the draft in the last week of Baisakh 2082. But at the same time, the position of NEPSE Chairman became vacant. Shobha Kant Paudel, who was then Joint Secretary at the Finance Ministry, was serving as NEPSE Chairman. On Baisakh 31, the Cabinet promoted him to Secretary. After the promotion, the chairman’s seat at NEPSE became empty.
If Paudel had remained chairman, the bylaw would have been passed in Jestha and sent to SEBON for approval. Other board members had already studied the draft. But once the chairman’s seat became empty, the approval process stopped.
The Finance Ministry did not appoint a chairman for months. Finally, on Bhadra 20, then Finance Minister Bishnu Paudel appointed Hemanta Bashyal as the new chairman. Representatives from Nepal Rastra Bank and the Finance Ministry on NEPSE’s board were also changed. A new independent director was added.
After Basyal joined, the draft bylaw was again presented to the board. Since most board members were new, they needed more time to study it. According to a NEPSE director, the bylaw will be discussed again after members give their suggestions, and only then will it be sent to SEBON for approval.
Because the bylaw has not been passed even after 10 months, SMEs planning to issue IPOs are left confused and disappointed. Companies like Swastik Agro were preparing to launch their IPO under the new rule. But due to delays, they are stuck.
The draft explains rules for SME securities listing, agreement format, company classification, delisting and relisting, trading units, pricing, trading hours, order rules, and price limits.
Minimum IPO application will be 500 units. Investors applying will also receive at least 500 units. Trading in the secondary market will also require a minimum of 500 units per order. Less than 500 units will be considered an odd lot and will not affect price limit calculations or market indices.
For trading SME shares, brokers must take 100% advance payment from buyers before placing buy orders.
Trading rules under the draft
Pre-open session: 10:30 AM to 11:00 AM
Continuous trading: 11:00 AM to 3:00 PM
From 2:45 PM to 3:00 PM, the weighted average of the trading price will be considered the final price. If no trade happens in this period, the last traded price will be considered final.
In the pre-open session, orders must stay within 5 percent above or below the previous day’s closing price.
In continuous trading, the first trade must be within 2 percent above or below the opening price.
If no trade occurs in the pre-open session, the opening price in the continuous session can be within 2 percent above or below the previous day’s closing price.
Daily price movement cannot exceed 10% up or down.
If the NEPSE SME Index moves 4% within the first hour of continuous trading, the market will pause for 20 minutes.
If it moves 6% within two hours, trading will pause for 40 minutes.
If it moves 8% at any time, trading will stop for the rest of the day.
