Thursday, July 4, 2013

CDS & Clearing Ltd (CDSC) & Stock Brokers resolve collateral dispute.

The need for investors to hold on to share certificates might soon be over, as CDS and Clearing Ltd (CDSC) has decided to become flexible regarding stock brokers' demand to issue them clearing membership.

CDSC's board and brokers have reached an agreement that a bank guarantee on behalf of the brokerage firms will be acceptable to cover cases of default or delay on settlements instead of cash. Brokers who are meant to be clearing members of the central depository system were not ready to undertake the role as it required them to deposit Rs one million as collateral with CDSC."

We have agreed to accept a bank guarantee instead of cash guarantee," informed CEO of CDSC Subodh Sharma Sigdel.

"Hopefully, we will see brokers taking up the clearing membership as soon as the regulator gives us a green signal to amend the provision," Sigdel added. Clearing members electronically transfer dematerialised shares belonging to investors stored in demat accounts at depository participants.

In the absence of clearing members, automatic clearing and settlement is not possible. Brokers had expressed strong objection regarding the provision that required them to deposit Rs one million in cash which would have remained idle at CDSC.

Clearing members are brokers who need to take membership from CDSC and obtain the authority to electronically transfer dematerialised shares.

"We brokers have agreed to furnish a bank guarantee to guarantee that we will not default on payments on transfer and settlement of shares traded like we do with the stock exchange," pointed out president of Stock Brokers Association of Nepal (SBAN) Narendra Raj Sijapati.

"We still have other issues but that will be addressed in the mode of operation that CDSC is preparing in association with brokers," Sijapati informed. Brokers have also expressed their displeasure regarding the provision of suspending a broker for a week if they are not able to settle the transaction on time among others.

Stock Brokers Association of Nepal and CDS and Clearing Ltd have reached the agreement in order to jumpstart CDSC's full operation that has been delayed indefinitely.

CDS and Clearing Ltd that is supposed to clear and settle shares traded at Nepal Stock Exchange has been unable to start its operation despite being fully capable.

CDS and Clearing Ltd would have been able to start operations a year back but it was unable to do so due to the absence of regulations and bylaws and also due to the lack of clearing members, registered companies and dematerialised account holders.

But more companies and investors are expected to join CDS and Clearing Ltd from the beginning of next fiscal year and once it starts operations for real.
src: tht

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