The law is being drafted as many problems have been seen in operation and functioning of commodity market in the lack of proper legislation and regulatory body.Securities Board of Nepal (Sebon) it has finalized a draft bill to manage and regulate the commodity trading market system. The capital market regulator also told Republica that the plan was to table the bill in the upcoming session of the parliament.
"The Ministry of Law, Justice, Constituent Assembly and Parliamentary Affairs is giving a final touch on the bill which will be tabled in the parliament after getting approval from the cabinet," Rewat Bahadur Karki, chairman of Sebon, said. "At present, commodity exchange companies are registered only at the Office of the Company Registrar which has made it difficult to regulate such companies. The law will make it easier for the commodity market to function and operate."
Sebon has said that it prepared the draft following consultations with exchange companies, brokers and commodity investors.
Mercantile Exchange Nepal Ltd (Mex), an exchange company which started operation in 2009, has suggested that Sebon introduce 'Spot Market' provision in the new bill.
Spot market refers to the market in which financial instruments or commodities are traded for immediate delivery, compared to the futures market, in which delivery is due at a later date.
"Currently Mex is delivering silver as per the 'Spot Market' concept. This type of market helps to build trust among market participants as well as create competitive price of commodities," Narendra Prasad Bhatta, relationship manager of Mex, told Republica, informing about the feedbacks that the company provided to Sebon.
The exchange company has also expressed its reservation over the paid-up capital for exchange companies proposed in the bill.
The draft bill has proposed a paid-up capital floor of Rs 500 million for commodity exchange companies.
"India, whose economy is 100 times bigger than Nepal, has fixed paid-up capital of Rs 500 million for exchange companies. Even the accumulated paid-up capital of all operating exchange companies does not reach the level proposed in the draft," Mex said in a statement, urging Sebon to review the proposed paid-up capital.
Mex has also suggested to Sebon to limit stake of foreign investors in commodities exchange companies to 49 percent, contending that such provision will put Nepali investors into minority.
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