September 5: Both new and old securities broker companies complain that there is only one company in the 'Trade Management System (TMS)' for buying and selling securities in the secondary market. By using TMS, brokers and investors can buy and sell securities through the Internet. Through TMS, brokers handle investor account opening, transaction risk management, portfolio management, etc. Investors can do their own work such as ordering shares, transferring funds, etc through TMS.
The TMS of Nepal Stock Exchange (NEPSE) is being run by 50 old stock brokers, citizen stock dealers and new brokers who have been allowed to trade. As the new broker has no choice, they are running the same TMS. TMS of NEPSE was built as well as is maintained by YCO.
SEBON has already given stock broker license to 37 out of 46 companies that applied for new broker license. Some of these brokers have already started trading with permission from NEPSE via TMS.
According to the market experts, YCO has a monopoly on TMS in Nepal. Therefore, even the old brokers cannot use another TMS.
With the implementation of the Securities Trading Regulations, 2079 (Third Amendment) by the Board, the way for brokers to operate a separate TMS has been opened. It is said that the old broker has already started the process to bring a separate TMS.
The old 33 brokers are going to use the TMS of Sri Lanka's IronOne Company, Sunny Securities of India's Tata Consultancy Services Limited and NASA Securities of India's Dion Global. The remaining 14 brokers will use NEPSE's TMS which is currently in operation.
Chairman of Stock Brokers Association of Nepal (SBAN) Dharmaraj Sapkota says that they have been preparing to introduce a new TMS for years.
“Since we had completed all the preparations one year ago, we announced that we would bring a new TMS from mid-July 2022. For this very purpose, we had set up a separate company.” However, the regulatory body stopped the process of Captech, a company opened by brokers with the aim of introducing a new TMS, by placing several provisions in the Application Program Interface (API) policy. Captech was the appropriate medium for the new TMS.
After the attempt to bring new a TMS by Captech was stifled, the old stock brokers have started the process of bringing TMS made by Sri Lanka's IronOne Company through the local representative Digihub.
A member of SBAN alleged that NEPSE and YCO together made various excuses and prolonged the process of bringing in a new TMS.
Sapkota says, “The new TMS could have been operational by now, which is hindered in the name of data migration and sometimes in the name of policy and audit. Groups with vested interest are prolonging the process.”
A senior official of NEPSE said that the work of the new TMS was delayed for a few months due to the testing of “data migration” and “audit”, but now the process is progressing rapidly. The server connection is done. Now, after testing, the new TMS will be operational in a few weeks, he said.
Sagar Dhakal, president of New Stock Brokers Association Nepal says, “The intention of most of the new brokers is to use YCO's TMS. There was also talk about the new TMS in our association. However, it is not possible for a new broker to bring a new TMS by investing heavily. Because there is no other option, we are running the TMS of YCO.”
They complain that YCO charges high fees from new brokers because TMS is monopolized by one company. It has been found that YCO charged Rs 500,000 to the new brokers in the name of 'onboarding cost'. Such fee has not been paid by the old stock brokers. Similarly, YCO has charged more than Rs 40,000 per broker from the new brokers list for the 'back office'. It has been found that the old stock brokers Rs 80,000 annually, but new stock brokers are charged Rs 120,000.
Dipesh Pradhan, Chief Executive Officer (CEO) of YCO Pvt. Ltd. says that YCO is collaborating with NEPSE as well as the company bringing the new TMS. Pradhan claimed that YCO did not charge more to the new broker companies.
“Earlier, NEPSE worked as a project, so there was no onboarding cost for the broker companies at that time. Now we have only charged the setup and installation fee,” said Pradhan, adding, “We have to charge for hardware, software, manpower etc. Just because we did not charge the old brokers does not mean that the fee will not be charged now.”