Register with CDS or get delisted: Nepse tells companies

Nepal Stock Exchange (Nepse) has given listed companies a month-long ultimatum to register with Central Depository System and Clearing Ltd (CDSCL) or face consequences.

CDSCL is a subsidiary of Nepse that provides one-window service for centralized depository, clearing and settlement services in the capital market. It acts as a central depository for various instruments (equity, bonds, and warrants etc) especially to handle securities in dematerialized form without physical movements of securities or execution of transfer.

“We have issued directive to the listed companies to get membership for the admission of the securities at the CDSCL by mid-August so that the central depository system comes into full-fledged operation,” Sitaram Thapaliya, general manager of Nepse, told , warning that Nepse would delist the companies that fail to meet the deadline.

Following long dispute between broker companies and the Securities Board of Nepal (Sebon) regarding the high net worth requirement for membership of depository participant (DP), the capital market regulator had slashed such requirement by 50 percent to Rs 5 million in February.

Though the CDSCL had expected that such move would give an impetus to start full-fledged operation of the central depository system within 2013/14, only few companies acquired CDSCL membership in 2013/14.

Stock market officials say companies showed reluctance to be DP within 2013/14 because of the cost factor. “Had they acquired membership before mid-July, they would have to pay membership fee as well as well as renewal fee in the new fiscal year 2014/15. That might be the reason why they didn´t acquire membership before mid-July,” said Thapaliya.

 “Though we had provided discount in membership fee to companies willing to register by mid-July, it seems that there was some communication problem between Nepse and listed companies.”

So far, only 17 companies have registered them with CDSCL. Similarly, there are only 10 licensed depository participants as of July 22, according to CDSCL. Likewise, 624 beneficial owners´ demat account has been opened with 179,815 units of shares in demat form.

Subodh Sigdel, CEO of CDSCL, said that Nepse´s diktat to the companies was a big achievement toward starting full-fledged operation of CDS. He said that central depository would start full-fledged operation from mid-October after the listed companies get membership, investors open their demat accounts through registered DPs and other procedures get completed  - Republica