Nepal's Capital Markets: SEBON, NEPSE and CDSC

Secondary coverage of Nepal’s stock market tends to use “NEPSE” as shorthand for the whole apparatus, the way “Wall Street” stands in for American finance. That is a mistake with practical consequences. Three institutions are involved, they answer to different instruments, they hold different powers, and they fail in different ways. A company that has satisfied SEBON has not thereby been listed. A trade that has executed on NEPSE has not thereby been settled.

The Securities Act

The Securities Act 2063 was authenticated on 14 January 2007 and is deemed to have commenced on 22 September 2006. It runs to nine chapters and does four structural things. It constitutes the Securities Board of Nepal. It makes registration of securities with the Board a precondition of issuing them. It makes operating a stock exchange or a securities business a licensed activity. And it creates a set of market-conduct offences carrying criminal penalties.

Almost everything else in Nepali capital markets law sits underneath the Act as regulation, bylaw or directive. The statute is nearly twenty years old and has never been rewritten, which matters for reasons taken up in Disclosure, Prospectuses and Market Conduct.

SEBON’s board

Section 3(2) gives the Board eight members: a chairperson appointed by the Government of Nepal; the Joint Secretary of the Ministry of Finance; the Joint Secretary of the Ministry of Law, Justice and Parliamentary Affairs; a representative of Nepal Rastra Bank; a representative of the Institute of Chartered Accountants of Nepal; a representative of the Federation of Nepalese Chambers of Commerce and Industries; one government-nominated expert, who must hold a master’s degree and seven years of relevant experience; and a secretary designated from the Board’s own staff.

Read that list again from a governance angle. Two of the eight seats belong to serving civil servants from ministries, one to the central bank, and one to the national chamber of commerce, whose members include the listed issuers SEBON supervises. The regulated interest has a seat and the government has three. That arrangement is common enough in the region and it is no scandal. It does explain why SEBON’s regulatory output tends to move at the pace of interministerial agreement.

The Board’s functional powers run through the Act’s chapters: registration of securities, approval of prospectuses, licensing of stock exchanges and of securities businesspersons, approval and supervision of collective investment schemes, and inspection and inquiry.

One funding feature is worth naming, because it recurs across the subordinate regulations. Merchant bankers must remit five percent of their annual merchant banking service fees to the Board. The central depository and its participants must remit five percent of the fees they collect. Mutual fund managers, supervisors and depositories remit a percentage of their quarterly fees. SEBON’s revenue therefore rises with market activity and with the fee income of the intermediaries it polices. Whether that alignment helps or hurts is a fair question. That it exists is a fact of the statutory design.

NEPSE and its annual licence

Nepal Stock Exchange Ltd operates the country’s only licensed equity market. It does so on a licence granted by SEBON, not under a charter of its own. An applicant must show paid-up capital of at least NPR 50 million, sufficient infrastructure, arrangements for enlisting securities, systems for investor protection, arrangements for settlement and publication of transactions, a complaints procedure, and machinery for enforcing rules against members.

The licence term is the striking part. Under section 42(1) it is valid only until the last day of the fiscal year in which it was issued, and must be renewed annually on payment of the prescribed fee. Nepal’s national market infrastructure runs on a permission that expires every mid-July. Renewal is routine. But the exchange is a licensee of the regulator in a way that a demutualised exchange with its own statutory footing is not.

The exchange must also report to SEBON on its activities within three months of each fiscal year end.

The depository

CDS and Clearing Ltd is a distinct company operating under the Central Depository Service Regulation 2067. The regulation gives it the job of clearing and settling securities transactions, including the transfer of securities, and requires it to indemnify a beneficial owner for loss caused by its own negligence. It also gives the electronic record its legal weight: records of transactions in a beneficial owner account maintained by the central depository company “shall be accepted as evidence in the proceedings before any competent authority.”

Ownership of the depository is restricted. Permitted shareholders include a recognised stock exchange, the Citizen Investment Trust, commercial and development banks, a foreign institutional investor, non-banking finance companies and depository participants. Individuals, private limited companies and cooperatives are excluded. A shareholder must have five years of operating history, net worth not below paid-up capital, and three years of profitability. Promoters are locked in for five years from the licence date.

The retail-facing layer is the depository participant. A bank or financial institution, a stock broker, a registrar and transfer agent, a custodian or another entity prescribed by the Board may act as one, and the minimum net worth is NPR 1 million. That threshold is low enough to have produced a dense network. CDSC’s own counters showed 124 depository participants on 26 August 2026, alongside 8,052,070 beneficial owner accounts and 286 companies with securities in dematerialised form.

Market size

For the year to Ashad end 2082 (15 July 2025), SEBON’s Annual Report for FY 2081/82 records 272 listed companies, market capitalisation of NPR 4,656.99 arab (NPR 4.66 trillion), annual turnover of NPR 2,124.92 arab (NPR 2.12 trillion) against NPR 734.68 arab the year before, and a closing NEPSE index of 2,794.79. The Board approved 144 securities issues during the year.

A year later the market was slightly smaller in capitalisation and unremarkable in daily volume. On 26 August 2026, market data showed total capitalisation of about NPR 4.40 trillion, float capitalisation of about NPR 1.48 trillion, and a day’s turnover of NPR 4.77 billion across 348 scrips.

The gap between total and float capitalisation is the single most useful number here. Roughly two-thirds of listed value cannot be traded, because promoter holdings are locked or restricted. Anyone modelling liquidity from headline market capitalisation will be wrong by a factor of three.

Reforms in progress

SEBON spent August 2026 consulting rather than legislating. It published a white paper on the development of Nepal’s primary capital market on 6 August, a Primary Capital Market Reform Policy 2083 on 12 August oriented towards market-based pricing, draft Margin Loan Trading Rules on 18 August, and draft Debenture Registration and Issuance Rules 2083 on 20 August. A first consultation paper on securities financing services appeared on 30 July.

Each of those is a draft or a policy statement. None is in force. The pattern is worth registering: the reform effort of 2026 is running through subordinate rulemaking under a 2007 statute rather than through a new statute. A reader who sees a Nepali headline about “new securities rules” should check which of those two things has actually happened.

Sources

1. Securities Act, 2063 (2007) — English text

   Securities Board of Nepal · Authenticated 14 January 2007; deemed commenced 22 September 2006 under section 1(2) · Tier 1 — Primary legal instrument

   Supports: SEBON's constitution and board composition (section 3), stock exchange licensing and minimum paid-up capital (sections 36 and 38(2)), annual licence expiry (section 42(1)), the chapter structure of the Act, and the exchange's annual reporting duty (section 47).

   Accessed 26 August 2026

2. Central Depository Service Regulation, 2067 — English text

   Securities Board of Nepal · 2067 (2010/11), first amendment · Tier 1 — Primary legal instrument

   Supports: Who may hold shares in a central depository company (regulation 14), depository participant eligibility and the NPR 1 million net worth floor (regulation 20), the depository's clearing and settlement function (regulation 10), evidential status of book entries (regulation 41), and the five percent fee remittance to SEBON (regulation 33).

   Accessed 26 August 2026

3. वार्षिक प्रतिवेदन आ.व. २०८१/८२ (Annual Report FY 2081/82)

   Securities Board of Nepal · Published 31 December 2025, covering the year to Ashad end 2082 (15 July 2025) · Tier 2 — Official publication

   Supports: 272 listed companies, market capitalisation of NPR 4,656.99 arab at Ashad end 2082, annual turnover of NPR 2,124.92 arab, NEPSE index of 2,794.79, and 144 securities issue approvals in the year.

   Accessed 26 August 2026

4. CDS and Clearing Ltd — corporate website, live depository counters

   CDS and Clearing Ltd · Figures as displayed on 26 August 2026 · Tier 2 — Official publication

   Supports: 8,052,070 beneficial owner accounts, 124 depository participants, 286 companies with securities dematerialised, 92 clearing members, 81 bonds and debentures and 69 mutual funds in dematerialised form, and 19,163,182,743 shares held in demat.

   Accessed 26 August 2026

5. SEBON news and consultation notices

   Securities Board of Nepal · Items dated 30 July, 6 August, 12 August, 18 August and 20 August 2026 · Tier 2 — Official publication

   Supports: The 2026 consultation programme: a consultation paper on securities financing services, a white paper on primary capital market development, the Primary Capital Market Reform Policy 2083, and draft margin loan and debenture rules.

   Accessed 26 August 2026

6. NEPSE market summary

   ShareSansar · 26 August 2026 · Tier 6 — Professional or news source

   Supports: Total market capitalisation of NPR 4,400,705.82 million and float market capitalisation of NPR 1,483,419.40 million on 26 August 2026, with turnover of NPR 4.77 billion across 348 scrips and 61,442 transactions.

   Accessed 26 August 2026