The decision to open a second stock exchange market in Nepal has sparked significant debate, reflecting both the potential for growth in the country’s financial sector and concerns over its execution. The Securities Board of Nepal (SEBON) has received approval from the cabinet to issue a license for this new market, signaling the country’s intent to expand its stock trading infrastructure.
Currently, the Nepal Stock Exchange (NEPSE), which began operations in 1994, is the only platform for secondary market trading. NEPSE has modernized its trading system by shifting to an online platform in 2018. However, there have been increasing calls for a second exchange, prompted by the perceived growth in the country’s stock market and the need for additional options for investors.
The idea of a new exchange was first floated by SEBON in 2022 but was met with legal challenges, leading to delays. In 2023, a panel led by Chinta Mani Siwakoti, former deputy governor of Nepal Rastra Bank, recommended restructuring NEPSE but left open the possibility of creating a second exchange. The committee argued that additional competition could benefit investors by introducing new technologies and making the market more efficient and investor-friendly.
The controversy surrounding the move has intensified due to allegations that the new exchange could be linked to ruling political parties, which has raised concerns about the independence of the process. Delays in appointing a new chairperson for SEBON have further fueled skepticism.
While proponents, like Rewat Bahadur Karki, argue that the new exchange would offer more options for investors and increase competition, critics, including Krishna Bahadur Karki of NEPSE, believe that restructuring NEPSE could achieve similar outcomes without the need for a second institution. He suggests that NEPSE could introduce new financial instruments, such as intraday trading, short selling, and derivatives, to enhance the market.
As the situation develops, the government faces a challenging task of balancing market growth with regulatory transparency and fairness.
