21st September 2025, Kathmandu
The Securities Board of Nepal (SEBON) has decided to suspend its controversial 15-minute average price calculation system for the Nepal Stock Exchange (NEPSE).
SEBON Suspends 15-Minute Price Calculation
The decision was announced on Sunday, Ashwin 5, 2082 (September 21, 2025), following an emergency board meeting held on Saturday evening. This decision comes after intense protests from a broad coalition of investors, including the general public and organized investor associations, who were united in their opposition to the new system. The Nepal Stock Exchange will now revert to its previous method of using the final traded price as the benchmark for daily transactions.
The Rationale Behind the Proposed System
Earlier in the year, SEBON had put forward a proposal to reform the way daily closing prices were determined on the NEPSE. The new mechanism aimed to calculate a share’s closing price based on the weighted average of all trades executed during the final 15 minutes of the trading session, specifically from 2:45 PM to 3:00 PM. This system was intended to replace the long-standing practice of using the price of the single final trade of the day, a method that regulators believed was susceptible to manipulation.
SEBON’s primary objective for this change was to enhance market transparency and stability. Regulators believed that the new system would:
Reduce market volatility: By averaging prices over a 15-minute window, the system would prevent a single, low-volume trade at the last second from causing a disproportionate and artificial spike or dip in a stock’s closing price.
Discourage speculative trading: It was hoped that the new method would make it more difficult for large-volume traders or groups to manipulate prices during the final minutes of trading, thereby promoting more rational, long-term investment strategies.
Promote fair price discovery: The weighted average would better reflect the true market sentiment and the collective value of a stock, as it would consider both the price and volume of multiple transactions.
Align with international standards: SEBON argued that many advanced capital markets, such as those in India and Singapore, use similar average-based mechanisms to prevent end-of-day manipulation, and that Nepal’s rapidly expanding market required similar modern safeguards.
The proposal was part of a broader push to modernize Nepal’s capital market, which has seen unprecedented growth in recent years, with a surge in new investors and daily trading volumes.
Widespread Opposition and Investor Concerns
Despite the clear regulatory rationale, the proposed 15-minute average system was met with an immediate and strong backlash from the investor community. On Saturday, just before the SEBON meeting, dozens of retail investors staged a demonstration outside the SEBON office in Kathmandu, demanding the immediate withdrawal of the plan. Their concerns were not just about technicalities; they were about the perceived impact on their ability to trade and their overall confidence in the market.
Key fears and criticisms from investors included:
Reduced ability to execute trades: Many investors, particularly retail traders, rely on the final minutes of trading to place or execute orders, especially when there are sudden price movements. They feared that a rolling average would reduce their ability to get their desired price, making it harder to manage their portfolios effectively.
Confusion and reduced transparency: Critics argued that the new system was overly complex and would create confusion, especially for the large number of new investors in the market. They felt that the traditional “last traded price” method was simpler and more transparent.
Disadvantage to small traders: A common argument was that the system would unfairly benefit institutional investors or large traders who could more easily influence the weighted average, while small traders would be at a disadvantage.
Potential for market disruption: Investor associations and market analysts warned that the system could lead to a dip in trading volumes and market liquidity as traders became hesitant to place orders in the final minutes of the session, fearing the impact of the new calculation method.
The backlash was not limited to physical protests; social media platforms were abuzz with discussions and posts from investors calling the proposal “unnecessary and harmful.” The unified opposition highlighted the power of the retail investor community in shaping market regulations in Nepal. It is also important to note that the Finance Minister, Rameshwar Khanal, had a day earlier reportedly instructed SEBON to scrap the rule, describing it as “impractical,” a move that likely facilitated the board’s swift decision.
SEBON’s Response and Future Implications
In light of the intense public pressure and the potential for market instability, SEBON convened an emergency board meeting. The decision to suspend the 15-minute average system was unanimous. A spokesperson for the board emphasized that the move was made to prioritize investor sentiment and maintain market stability. For now, NEPSE will continue to set closing prices based on the final transaction of the day. The controversial mechanism will remain on hold until further notice, and SEBON has stated that any future implementation will only happen after extensive consultation with all stakeholders.
The suspension provides immediate relief to investors and traders who were concerned about the new system. It prevents the short-term disruptions that a rapid transition might have caused. However, the episode also underscores a broader, ongoing challenge for Nepal’s capital market. As the market grows and attracts more participants, regulators are under pressure to implement modern risk-management tools to protect investors and ensure market integrity. While the average price system is off the table for now, SEBON is expected to explore alternative measures, such as strengthening circuit breaker rules, enhancing surveillance of suspicious trades, and launching more comprehensive investor education programs.
The incident serves as a crucial reminder of the importance of stakeholder engagement and transparent communication when introducing significant regulatory changes. The abrupt proposal of a new pricing system without sufficient public consultation led to a loss of investor confidence, which regulators are now working to restore. For investors, the key takeaway is to remain informed about regulatory developments and to understand that while the market is evolving, their collective voice holds significant power in shaping its future. The temporary suspension of this policy is a direct result of that collective action, signaling a more balanced approach to regulation that takes into account both market stability and investor sentiment.