The Securities Board of Nepal (SEBON) has begun preparations to revise the circuit breaker rules in Nepal’s secondary stock market following growing criticism that the current system disrupts smooth share trading.
SEBON Chairperson Santosh Narayan Shrestha said the regulator is considering changes based on recommendations made by a government-formed panel six months ago. The task force was created after a sharp market decline on the first trading day following the Gen Z movement of September 8–9. On September 19, Finance Minister Rameshore Khanal formed a four-member committee to suggest systemic and procedural reforms to restore investor confidence.
The panel, led by Rupesh KC, acting executive director of SEBON, submitted more than three dozen recommendations to improve the performance of Nepal’s secondary market. Among its long-term proposals were separate specialized laws for securities market regulation, investor protection, and trust management. The panel also suggested upgrading the trading system of the Nepal Stock Exchange (NEPSE) to meet international standards and enabling the trading of government and corporate bonds.
SEBON’s concerns have intensified after strong criticism from investors regarding the current circuit breaker rules. On Monday—the first trading day following the recent general election—NEPSE triggered three successive circuit breakers, leading authorities to halt trading within just one hour.
Investor Rajan Pradhan criticized the move, arguing that stopping trading during a rising market discourages investors. He said that disrupting the market under the circuit breaker rule does little to boost investor confidence.
According to a SEBON official, senior representatives from SEBON and NEPSE held a meeting on Tuesday to discuss potential reforms. Many participants suggested that circuit breakers should be based on the float index rather than the overall NEPSE index.
A circuit breaker is a regulatory mechanism that temporarily halts trading when stock prices fluctuate sharply. NEPSE currently applies both stock-specific and index-based circuit breakers.
Under the existing rules, trading is suspended for 20 minutes if the index moves beyond a set threshold during trading hours. If the index rises or falls by 5 percent, trading stops for 40 minutes, while a 6 percent fluctuation halts trading for the rest of the day.
The last revision to the circuit breaker rules was made in April 2019. Chairperson Shrestha said SEBON is now considering more flexible measures to improve market stability and strengthen investor confidence.
