Capital Market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc.
- It consists of primary market and secondary market.
- Primary Market deals with trade of new stocks and other securities,
- Whereas Secondary Market deals with the exchange of existing or previously issued securities.
Capital market reforms in Nepal refer to the set of policy, regulatory and structural changes introduced to strengthen, modernize and expand the country’s securities and financial markets. These reforms are aimed at increasing investor protection, improving market liquidity, enabling new instruments, and aligning Nepal’s capital market with international standards.
In Nepal, Security Board of Nepal (SEBON) and Nepal Stock Exchange (NEPSE) play major role in capital market reforms.
1. Security Board of Nepal (SEBON)
It was established by the government of Nepal on June 7, 1993 as an apex regulator of Securities Markets. It operates under the Securities Act, 2006, to regulate, monitor, and promote the capital market and safeguard investors’ interests.
The major functions and duties of SEBON are as follows:
- Provides policy advice to the Government on matters related to the development of capital market.
- Regulates and supervises the activities of stock exchanges, brokers, dealers, merchant bankers, and other market participants.
- Approves and monitors the public issuance of shares, debentures, and mutual funds by companies.
- Ensures the protection of investor rights through transparency and fair trading practices.
- Promotes the growth and modernization of the capital market through reforms, technology adoption, and awareness programs.
- Takes disciplinary action against market malpractice, fraud, and insider trading.
- Issues licenses to market intermediaries such as brokers, portfolio managers, and credit rating agencies.
2. Nepal Stock Exchange (NEPSE)
The government of Nepal has set up a security buying and selling center in Nepal in 2033 B.S. The same center transformed into Nepal Stock Exchange Limited (NEPSE) in 2050 B.S. The main purpose of the stock exchange is to trade the listed securities.
The followings are the major functions of NEPSE:
- Provides a market platform for buying and selling of secondary shares, debentures, and bonds.
- Lists public limited companies, ensuring only eligible and transparent firms are allowed to trade their shares.
- Ensures trading transparency by publishing daily share prices and company information.
- Oversees the clearing and settlement of trades to ensure smooth transaction completion.
- Provides online trading platforms for investors across Nepal through registered brokers.
- Promotes investor education and awareness regarding securities investment.
