How NEPSE Trades and Settles: Dematerialisation, CDSC and Market Mechanics
Nepali shares exist only as book entries at CDSC, and the account chain behind them explains why the market is easy to enter and hard to exit.
Nepal’s equity market is unusually easy to enter and unusually hard to move size in. Both facts come out of the same infrastructure, and an investor who understands the account chain will understand the liquidity problem as a consequence rather than a surprise.
What you need to trade
A beneficial owner account. Listed Nepali securities exist only as electronic entries at CDS and Clearing Ltd. When securities are dematerialised, the issuer or its registrar cancels the certificate and substitutes the depository as registered owner in its records. What the investor holds thereafter is a credit in a beneficial owner account, identified by a unique account number. Regulation 41 of the Central Depository Service Regulation 2067 supplies the legal backing: the depository’s records of transactions in that account are to be accepted as evidence before any competent authority.
A depository participant. The account is opened through a participant, not with CDSC directly. Banks and financial institutions, stock brokers, registrars and transfer agents, custodians, and any other entity the Board prescribes may act as one. The minimum net worth is NPR 1 million. That is a very low bar for a financial licence, and it explains the density of the network: 124 depository participants were operating by 26 August 2026, spread well beyond Kathmandu.
The participant’s duties are set out in the same regulation. It may open an account only under a signed agreement with the beneficial owner, must act on dematerialisation instructions within seven days, must keep accounts segregated, and must issue periodic statements. It is forbidden from giving investment advice or making exaggerated statements, which is a live restriction given how many participants are also brokers.
A broker. Orders reach the exchange only through a licensed stock broker, which is a separate licence from the depository participant licence even where the same firm holds both. The intermediary taxonomy is set out in Merchant Banking and Market Intermediaries.
A CRN and a Mero Share login. CDSC operates Mero Share as the retail-facing portal for viewing holdings and applying for public issues, and it runs the centralised digital KYC arrangement and the C-ASBA process under which an issue application blocks money in the applicant’s own bank account rather than collecting it. On 26 August 2026 CDSC reported 7,140,828 registered Mero Share users, of whom 5,064,770 were active.
That last pair of numbers is the most informative statistic in Nepali market infrastructure. Against 8,052,070 beneficial owner accounts, roughly 3 million are dormant or nearly so. The demat account count measures IPO application demand rather than a secondary-market investor base.
Clearing and settlement
Trades matched on NEPSE are cleared and settled by CDSC under its Securities Transaction Clearing and Settlement Byelaws. In the consolidated English text we were able to read, revised in 2073 (2016/17), byelaw 13 requires settlement within three working days of the trade date, counted excluding the day of the trade, with a daily cut-off in the afternoon.
That text has been amended at least four times since, most recently in a fifth amendment in 2077 (2020/21), and the amendment documents CDSC publishes are image-only scans that could not be read. The cycle may now be shorter. A treasury function planning cash movements against Nepali equity trades should confirm the current byelaw directly with its clearing member rather than relying on the figure above.
The rest of the settlement architecture is more stable and more revealing.
Clearing members post collateral of NPR 500,000, in cash or an equivalent bank guarantee. Against a market where a single member can execute a large fraction of a day’s NPR 4.77 billion turnover, that is a token amount. It tells you that settlement risk in Nepal is managed by post-hoc discipline rather than by margining.
Failure is handled by close-out. Where a member fails to settle in time, the byelaws provide for a close-out auction with a penalty of twenty percent of the failed trade value, and allow suspension of a member that cannot settle. The company may establish a guarantee fund. Permissive drafting on a settlement guarantee fund, combined with a NPR 500,000 collateral floor, means the residual risk of a large member default sits somewhere other than in a pre-funded pool.
Pledging is supported. The depository must make available a facility to record a mortgage, pledge or freeze on securities. That is the mechanism underneath margin lending against shares, which SEBON put out for consultation as draft Margin Loan Trading Rules on 18 August 2026 and which it had previously addressed by directive.
Liquidity in numbers
Three figures from 26 August 2026 describe the trading environment better than any narrative.
Total market capitalisation was about NPR 4.40 trillion. Float capitalisation was about NPR 1.48 trillion. Turnover that day was NPR 4.77 billion across 13,582,320 shares, 61,442 transactions and 348 scrips.
Take them in order. The gap between total and float capitalisation is structural rather than cyclical. Promoters must retain at least 51 percent of a listed company, because the public offer is capped at 49 percent of issued capital, and promoter shares carry a three-year lock-in after allotment. Two-thirds of the market’s notional value is therefore not available to anyone at any price.
Turnover of NPR 4.77 billion against float of NPR 1.48 trillion is a daily turnover ratio of roughly a third of one percent. Spread across 348 traded scrips, the average name traded about NPR 14 million in the day, and the distribution will be far more concentrated than the average implies. An institutional investor accustomed to sizing positions as a multiple of average daily volume will find that even a few hundred thousand US dollars in a mid-sized Nepali listed company represents many days of that stock’s volume.
The 61,442 transactions against 13.58 million shares gives an average trade of 221 shares. This is a retail order book.
Margin lending
The pledge facility is the technical foundation of margin lending, and 2026 was the year SEBON began rebuilding the rules on top of it. A Margin Trading Facility Directive 2082 was registered in February 2026, draft Margin Loan Trading Rules went out for consultation on 18 August 2026, and a first consultation paper on securities financing services appeared on 30 July 2026.
Three documents in seven months on the same subject indicate a regulator that has decided leverage against listed shares needs a proper framework and has not yet settled what it should be. For an investor, the practical point is that the terms on which a Nepali broker or bank will lend against a demat holding are in flux, and any financing assumption in a 2026 model should be treated as provisional. For the market as a whole, the interaction is worth watching. Adding leverage to an order book where the average trade is 221 shares and the float is a third of capitalisation changes the volatility profile faster than it changes the liquidity profile.
Constraints for outside investors
Entry into the account chain is administrative rather than difficult. The prior question, whether a given investor may hold Nepali securities at all, is dealt with separately in Who Can Buy Nepali Securities.
Once inside, four constraints bind.
Position size is limited by float, not by market capitalisation. Exit will take longer than entry, because entering can be spread across weeks while exiting under pressure cannot. Settlement finality depends on byelaws we could not confirm in their current form, so the working assumption should be several working days rather than same-day. And the collateral and guarantee arrangements behind settlement are thin enough that counterparty selection at the clearing member level is a real decision rather than a formality.
None of that makes the market unusable. It does mean the operational plan for a Nepali equity position has to be written before the investment case, rather than after it.
Sources
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Central Depository Service Regulation, 2067 — English text
Securities Board of Nepal · 2067 (2010/11), first amendment · Tier 1 — Primary legal instrument
Supports: The depository's clearing and settlement function and negligence indemnity (regulation 10), the pledge and freeze facility (regulation 10(k)), depository participant eligibility and the NPR 1 million net worth floor (regulation 20), the seven-day dematerialisation instruction period and account segregation (regulation 12), the cancellation of certificates and substitution of the depository as registered owner (regulation 24), and the evidential status of book entries (regulation 41).
Accessed 26 August 2026
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Securities Transaction Clearing and Settlement Byelaws, 2069 (third revision, 2073) — English text
CDS and Clearing Ltd · 2069 (2012/13), revised 2073 (2016/17); later amended to a fifth amendment in 2077 · Tier 1 — Primary legal instrument
Supports: The settlement cycle of three working days after the trade date (byelaw 13), clearing member collateral of NPR 500,000 in cash or bank guarantee (byelaw 7), criteria for clearing banks (byelaw 12), close-out auction and a 20 percent penalty on failed trade value (byelaws 19 to 21), suspension of a member unable to settle (byelaw 15), and the discretionary guarantee fund (byelaw 46).
Accessed 26 August 2026
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CDS and Clearing Ltd — corporate website, live depository counters and services
CDS and Clearing Ltd · Figures as displayed on 26 August 2026 · Tier 2 — Official publication
Supports: 8,052,070 beneficial owner accounts, 7,140,828 registered and 5,064,770 active Mero Share users, 19,163,182,743 shares in demat form, 286 registered companies, 124 depository participants, 92 clearing members, 81 bonds and debentures and 69 mutual funds, and the service list covering dematerialisation, rematerialisation, account statements and pledging.
Accessed 26 August 2026
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Securities Act, 2063 (2007) — English text
Securities Board of Nepal · Authenticated 14 January 2007 · Tier 1 — Primary legal instrument
Supports: That the stock exchange licence under section 38(2) requires arrangements for settlement and publication of transactions and for enforcement against members, and that the licence expires annually under section 42(1).
Accessed 26 August 2026
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ShareSansar · 26 August 2026 · Tier 6 — Professional or news source
Supports: Total market capitalisation NPR 4,400,705.82 million, float capitalisation NPR 1,483,419.40 million, turnover NPR 4,773,857,657.46, 13,582,320 shares traded, 61,442 transactions and 348 scrips traded on 26 August 2026.
Accessed 26 August 2026
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Securities Board of Nepal · Posted 10 February 2026 · Tier 1 — Primary legal instrument
Supports: That SEBON registered a margin trading facility directive in February 2026, ahead of the draft Margin Loan Trading Rules issued for consultation on 18 August 2026 and the securities financing services consultation paper of 30 July 2026 listed on SEBON's news page.
Accessed 26 August 2026
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CDSC bylaws and circulars index
CDS and Clearing Ltd · Index checked 26 August 2026; latest depository byelaw amendment listed is the seventh amendment, 2080 · Tier 2 — Official publication
Supports: The list of operative byelaws and directives including the Centralized Digital KYC Operation Directive 2077, the CASBA Directive 2074, the EDIS mode of operation, family transfer procedures 2075, and the seventh amendment to the depository byelaws in 2080.
Accessed 26 August 2026
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