Kathmandu. The new circuit breaker rule will come into effect from Monday to control the high volatility in the stock market.
Nepal Stock Exchange (Nepse) is set to implement a new circuit breaker rule from Monday. The provision of 3 circuit breakers will be reduced to 2 from the previous 3.
The new rules are going to be implemented after the Securities Board of Nepal (SEBON) endorsed the amendment to the transaction bylaws made by NEPSE. “This rule will come into effect from Monday,” said Murahari Parajuli, spokesperson of NEPSE.
In order to control the high volatility in the stock market, the first circuit break will be imposed 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. “After the first circuit is at 5 percent, the trading will be stopped for 15 minutes,” Parajuli said, “After that, if the market rises or falls by 8 percent, the circuit breaker will be applied and the trading will be stopped for the rest of the time.” ’
Earlier, in order to control the high volatility in the market, the circuit brake was applied when the market rose or fell by 4 percent, then rose or fell by 5 percent and when it went up or down by 6 percent in the first hour of trading. 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 suspended for 40 minutes and then at 6 per cent the circuit breaker will be suspended for the rest of the transaction.
Similarly, NEPSE has increased the maximum limit of share price fluctuation to 5 percent in the pre-open session and up to 15 percent in the regular session. Earlier, the maximum limit for price fluctuation in the pre-open session was 2 percent and in the regular session it was 10 percent.
Similarly, according to the amended provision, order placement can now be done for the purchase and sale of shares in the aftermarket. “This is a broker facility,” Parajuli said, “So the sooner the broker puts this feature in his TMS, the sooner the investors will get this facility.” ’
The facility of after-market order placement has been added after Nepalis living abroad complained that it was difficult to trade shares in the country of their residence. Experts believe that if this system is established, it will further contribute to the development and expansion of the capital market.
