Should NEPSE Halt Trading Temporarily or Not?

🛑 Should NEPSE Halt Trading Temporarily?

✅ Arguments in Favor of a Temporary Halt

1. Prevent Panic Selling

   • During extreme political events, fear-driven sell-offs can push prices far below fair value. A halt gives investors time to process events rationally.

2. Market Integrity

   • If protests disrupt communication, banking transactions, or broker operations, halts protect against unfair trading advantages.

3. International Precedent

   • Many markets use “circuit breakers” (e.g., US, India, Hong Kong) to pause trading after steep declines.

   • Example: In March 2020 (COVID crash), the US stock market triggered circuit breakers 4 times in 2 weeks to calm panic.

4. Reputation Protection

   • A crash triggered by temporary chaos could hurt investor confidence for years. Pauses may help avoid reputational damage.

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❌ Arguments Against a Trading Halt

1. Loss of Liquidity

   • Investors may get trapped in positions if they cannot sell. This can worsen distrust in the exchange.

2. Delayed Reality Check

   • A halt doesn’t stop uncertainty — it just postpones price discovery. When trading resumes, the shock may be even sharper.

3. Market Credibility Risk

   • If halts are perceived as political interference, investor trust (especially foreign interest) may erode.

4. Past Nepali Experience

   • NEPSE has suspended trading during strikes, conflicts, and technical upgrades in the past. While it reduced immediate panic, it also disrupted investor activity and caused backlogs.

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⚖️ Expert View

• Instead of a full trading halt, NEPSE could adopt tiered circuit breakers (for example: halt trading for 15 minutes if the index falls 5%, for 30 minutes at 10%, and suspend for the day at 15%).

• This balances stability with transparency, aligning Nepal with international best practices.

• A full halt should only be considered if physical operations (banking settlements, broker access, clearing system) are genuinely disrupted by protests.

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🧭 Recommendation for Nepal

• Do NOT fully close NEPSE unless absolutely necessary.

• Strengthen circuit breaker rules and communicate them clearly to investors.

• Ensure settlement, banking, and telecom systems are functional during protests to avoid operational risks.

• Encourage regulators (SEBON + NRB) to coordinate liquidity support for the financial system, instead of suspending the market.

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👉 Bottom Line:
Temporary halts may prevent panic, but overuse can damage credibility. For NEPSE, strong circuit breakers + clear communication is a smarter strategy than a blanket shutdown.