22 January 2021, Kathmandu
Voices are now being raised in the Sudha Devkota stock market that there should be an automated Electronic Deposit Instruction Slip (EDIS). This issue has started to arise as the problem of investors closing day by day in the growing market has increased tremendously. Covid-19, which has frightened the world like an epidemic, has made a great contribution in digitizing the Nepali stock market.
As the share trading has started online, voices have been raised that there should be auto EDIS. The problem of closeout is increasing as investors are not yet accustomed to trading online and are unable to sell their shares and do EDIs.
According to the Central Depository System (CDS), the closeout in the current financial year has been less than the rum, but it has not been eliminated. However, the number of closeouts in the market is not low yet, said CDSC spokesperson Suresh Neupane.
However, at this time, when trading online in the stock market, there is a provision to trade only by checking the DP holding. If the shares are not in the seller’s Demat account, the transaction cannot take place.
Thus, even when the broker is trading by checking the DP of the share seller, the problem of continuous closeout has become monstrous. When the shares are sold, the shares are in the investor’s account. But spokespersons Neupane said the sellers were closing out because they did not do the EDIS on time.
In addition to making it mandatory to trade online, the broker company was not allowed to place share sale orders without checking the seller’s DP. But the broker companies say that the DP check could not be done due to problems in Trading System Management (TMS) from time to time.
Bharat Ranabhat, the outgoing chairman of the Nepal Stock Brokers Association and the executive chairman of Kohinoor Investments and Securities, said that the stock market has been steadily reaching new heights in recent times.
Ranabhat said that when the regular share price rises, the distortion of not giving shares to the investors will end and the problem of closeout will also be solved.
According to Ranabhat, when the settlement time was three days, many investors were in closeout, but now the time for RAFSAF is falling to two days from January 11. He estimates that this will lead to more closures. Ranabhat says that if the DS is automated as soon as the shares are sold, there will be no double hassle for the investors and there will be no problem of closeout.
While Ranabhat is predicting an increase in close-outs. The general investors are now raising their voices for automated EDIS in the stock market. Investors, however, have accused the EDIS system of only trapping investors.
Radha Pokharel, the chairperson of the Nepal Capital Market Investors’ Association, said that the current EDIS system should be removed. As there is an arrangement to trade shares only after checking the DP of the sellers while trading online.
Pokharel said that the provision of EDIs would eliminate the problem of closeout without the knowledge of small. And new entrants and skilled investors in the market.
However, he said that the number of those who are in the closeout has been increasing. Even though TMS is not showing the shares in the DP and has already sold the shares.
Pokharel said that even after the second day of EDIS. The shares of the company concerned will be shown in the DP. And even when the investors sell the same shares, they will be in closeout.
CDSC spokesperson Neupane informed that the policy should be modified to make arrangements for automated EDIS. Neupane said that it would not be possible to implement automated EDIS immediately. As the investors have to do the EDIS themselves by calculating the cost average (capital gains tax) as per the share trading.
Rejecting the recent rumors in the market that the number of closeouts has increased due to EDIA. Neupane said, “There is now a facility to do EDIs at home by trading shares through online medium. And there is no problem of closeouts due to the option of EDIs.”
‘Capital gains tax cannot be levied unless the investor himself makes a DPI. Such an arrangement cannot be made unless such a thing is changed in a policy manner. For this, the law itself needs to be modified ‘, Neupane said.
According to the investors, even if some changes have to be made in the facility. The concerned bodies should not back down from it, said Ranabhat.
Although it will be difficult to auto-IDIS if all the shares are not dematerialized yet. Ranabhat insists that arrangements should be made for auto-IDIS of online transactions.
Ranabhat said that in the current situation where all the shares have been dematerialized. The concerned bodies should give a limited time to calculate the weighted average by providing limited resources to the shareholders.
At present, the amount traded can be paid online. Which is not likely to go to another account other than the customer’s bank account. That is why Ranabhat stressed the need for automated EDIS.
