Kathmandu. Circuit breaker has been set up in NEPSE to control the high volatility in the stock market. Currently, NEPSE has three circuit breakers when the market is fluctuating. Now it is going to be reduced to two circuit breakers. However, the upper limit of the circuit breaker will be increased.
Nepal Stock Exchange (Nepse) has sent a proposal to the Securities Board of Nepal (SEBON) seeking approval to amend its trading bylaws. If SEBON approves it, NEPSE will amend some other provisions along with the provision of circuit breaker in the bylaw.
According to a senior official of NEPSE, the current system of circuit breaker is being reduced to two by amending the transaction bylaws. “In order to control high volatility, the first circuit break will be applied when the market goes up or down by 5 percent in the first hour of trading and then the second circuit break when the market goes up or down by 8 percent,” the official said. ’
Currently, in order to control the high volatility in the market, the circuit brake is applied when it rises or falls by 4 percent, then when it rises or decreases by 5 percent, and when it decreases or rises by 6 percent. As per the provision, a circuit breaker at 4 per cent will be used to suspend the transaction for 20 minutes, then at 5 per cent the circuit breaker will be applied and the transaction will be stopped for 40 minutes and then at 6 per cent the circuit breaker will be suspended for the rest of the transaction.
Similarly, NEPSE is set to increase the share price up to 5 percent in the current pre-open session. Currently, the maximum increase in the share price in the pre-open session is up to 2 percent.
Another third amendment proposed is an aftermarket order placement. The bylaws are being amended to allow the company to place an order for the purchase and sale of shares even after the trading time. According to the NEPSE official, this arrangement has been made after receiving complaints that Nepalis living abroad are facing inconvenience in trading shares in the country where they live. According to the official, if this system is established, it will further support the development and expansion of the capital market.
According to a SEBON official, the proposal to amend NEPSE’s transaction bylaws was discussed internally. “The proposal will be sent to the SEBON board of directors. It is possible that the board of directors meeting will be held tomorrow to take a decision in this regard,” the official said.
