After the arrival of the new private sector stock exchange, Nepal Stock Exchange (NEPSE) has prepared a five-year business strategy. The strategy includes measures to strengthen management and modernize NEPSE, as well as proposals to cooperate with major exchanges around the world to modernize NEPSE. The plan is to operate modern instruments such as intra-day, short-term trading, and derivatives through outsourcing and modern technology, starting from the first year.
This cooperation will promote NEPSE’s revenue in a positive way. According to the report, the targeted modernization will increase the business by three times in the first year alone. Last fiscal year, NEPSE sold shares worth NPR 1.2 trillion. However, it is estimated that NEPSE’s business will reach NPR 37.9 trillion in the first year of SART and Intra-day trading.
NEPSE earns a commission of NPR 11.47 billion by working at the current rate. This is more than six times the revenue generated by NEPSE in the last fiscal year. Only 20 percent of this amount, which is NPR 2.29 billion, is earned by NEPSE alone. The report does not include the portion of the derivative. If the report is to be believed, NEPSE earns NPR 660 million by providing derivative trading services.
There is a strategy to take advantage of global tenders for the development of the market, which requires expertise, physical and technological resources. If efforts to establish a government-to-government agreement are not successful, the strategy is to continue with the issuance of global tenders. Both conditions have established specific criteria.
NEPSE has announced its intention to expand its ability to provide various instruments on the share market through cooperation. Its aim is to develop a multi-asset business, including various types of derivatives, foreign currency derivatives, mutual funds, index funds, auction, and SMEs, as well as developing a clearing and settlement system. It also plans to bring intraday trading, covered or naked short selling, and other market operations under its management.
According to the report, Nepal Stock Exchange (NEPSE) is preparing to increase its capacity, including clearing and enhancing the ability of market members, not just limiting itself to the organization. The strategy also mentions increasing expertise and experience. NEPSE aims to make the exchange mature internationally.
It is estimated that by the end of five years, the total business, including short selling and intraday trading, will reach NPR 11.999 trillion. Accordingly, NEPSE will receive an annual commission of NPR 36.29 billion, of which 20% will be NPR 7.25 billion.
In five years, there will be an annual business of three crore and ninety-six lakh in the derivative market. Nepal Stock Exchange (NEPSE) will earn 4.95 billion rupees. When combined with the earnings from derivative and regular businesses, NEPSE is expected to earn 12.20 billion rupees annually.
During this period, it is expected that there will be 75 brokers in operation. Out of these, 200 clients of each broker will conduct only one transaction per day. The plan is to conduct business for only 220 days per year. According to the promotion, business will increase at an annual rate of 10 percent.
In the first year, the number of clients conducting derivative business, which started with 200, will spread to 800 people. These clients will conduct only two transactions per day. According to NEPSE’s plan, the goal is to earn a total of 38.40 billion rupees in five years.
NEPSE has suggested that the cost of implementing this plan could be covered by a recommended annual fee payment model. This model, which can be implemented through two different approaches, could be highly profitable in the long term for the plan. A proposal has been made for a fixed annual fee and revenue-sharing model.
When working with a fixed annual fee, a set amount is charged on an annual, semi-annual, or quarterly basis for the work performed. On the other hand, with the revenue-sharing model, the company would need to negotiate a fixed rate on the income generated.
However, the research report mentions a strategy to supply necessary services through global tenders under the fixed annual fee.
According to the new exchange system, a proposal has been made to privatize NEPSE by issuing an IPO. There is also preparation to involve foreign strategic partners in this plan.