While the Securities Board of Nepal (SEBON) is pushing forward the process to license a new stock exchange, the long-stalled restructuring of Nepal Stock Exchange (NEPSE) remains unresolved.
The government renewed its call to restructure NEPSE through an announcement in the annual budget for Fiscal Year 2025/26. However, the proposal has been pending at the Ministry of Finance for the past 18 months.
SEBON, which initially aimed to proceed with NEPSE’s restructuring alongside the licensing of a new stock exchange, recently sent a letter requesting an update on NEPSE's progress. In response, NEPSE’s Information Officer Murahari Parajuli stated, “We had submitted the restructuring proposal to the Ministry of Finance 18 months ago.” NEPSE had submitted its action plan on December 14, 2023.
NEPSE’s restructuring plan includes issuing shares to the public, bringing in foreign strategic partners, and involving domestic institutions with good corporate governance. In the first phase, NEPSE plans to issue Rs 500 million worth of shares to employees and the general public.
The proposal aims to raise NEPSE’s paid-up capital to Rs 3 billion, with 30% of shares issued to the public (including employees) and existing shareholders retaining a 33.33% stake. It also proposes allocating 36.67% to institutional investors—15% to a foreign stock exchange, and up to 5% to any single domestic institutional investor or group.
Currently, NEPSE has a paid-up capital of Rs 1 billion, with 58.66% held by the government. Other major shareholders include Rastriya Banijya Bank (11.23%), Employees Provident Fund (10%), Nepal Rastra Bank (9.5%), Laxmi Bank (5%), Prabhu Bank (5%), and others (0.6%).
A study committee formed under the coordination of former NRB Deputy Governor Chintamani Siwakoti also recommended restructuring NEPSE while assessing the need for a new stock exchange.
A senior SEBON official stated that the board is trying to advance both processes in parallel. Although SEBON Chair presented the new stock exchange licensing proposal at a board meeting a week ago, it could not move forward due to a lack of consensus.
Three companies—Himalayan Stock Exchange, National Stock Exchange of Nepal, and Annapurna Stock Exchange—have applied for a new stock exchange license. One of them will be selected.
As per the decision made during the same board meeting, SEBON publicly released the study report on June 3, 2025, which also recommends the restructuring of NEPSE.
Key Recommendations from the Study Report
Paid-up Capital:
To operate a modern international-standard securities trading platform, the report recommends setting a minimum paid-up capital of Rs 3 billion, subject to future adjustments by the regulator.
Share Ownership:
To ensure transparency and accountability, at least 30% of NEPSE’s shares should be reserved for public (including employees) issuance through a public offering.
Board Composition:
NEPSE’s board should have at least five members, including one representative from Nepal Rastra Bank and at least one woman. A majority should be independent directors. NEPSE's Memorandum and Articles of Association must be amended accordingly. The same governance model should apply to CDS and Clearing Ltd., with NEPSE’s CEO serving as chair.
Trading System:
The trading platform must undergo a full system audit by an internationally recognized auditor. Integration with banks should be completed swiftly, and the system must be reliable and widely tested. Broker members should be given access to Application Programming Interfaces (APIs), and proper backup and order execution systems must be ensured.
IT Infrastructure:
A high-quality, internationally accepted IT system must be developed to enhance market monitoring, reduce cybercrime, manage grievances online, deliver investor education, and ensure centralized and secure information dissemination. Though this will require significant upfront investment, long-term benefits are expected.
Human Resources:
NEPSE and CDSC must recruit skilled professionals with backgrounds in IT, computer science, statistics, or science. Staff should be regularly trained to handle market expansion, technology upgrades, and software operations. Attractive benefits should be provided to retain talent.
Governance and Risk Management:
A strong governance and risk management structure is essential, the report recommended, adding it may be appropriate to operate sister organizations under NEPSE to mitigate specific risks.
Physical Infrastructure:
The report also noted that NEPSE’s current office is outdated and requires renovation and expansion. It advised CDSC to shift from a rented facility to a permanent building.
Product Diversification:
Beyond current instruments such as ordinary shares, preference shares, bonds, debentures, government securities, and mutual funds, the report recommended the restructured NEPSE to introduce new products like commercial papers, treasury notes, derivatives, futures, swaps, depository receipts, exchange-traded funds (ETFs), real estate investment trusts (REITs), mortgage-backed securities, lending and borrowing facilities, intraday trading, and insurance-linked products.
