Internship Report on Nepal Stock Exchange

CHAPTER ONE

INTRODUCTION

1.1 Background

Tribhuvan University has designed various management degrees under Faculty of Management (FOM) and among them one of the outstanding developments is in the form of Bachelors of Business Administration (BBA), which had been established in 2002. This program is a felt necessity to link between knowledge and practice to give professionalism as the pressing requirement of HRD Development to suit micro economic needs of the country. It is a Four –Year program designed with¬¬ eight semesters as a complete package of BBA eligibility and tries to cover the operations and transactions of the practical business world with particular focus on Nepalese context. This course deals with the fundamental concept of corporate worlds which are essential for any persons aspiring to be the active participants of this competitive world. The BBA program aims to overcome the drawbacks of other existing management degrees of TU and hence focuses on the development of the students through field visits, report preparation, presentation and of course, internship program. The entire above mentioned and other course matters helps the educational institutions to produce the skillful, confident, knowledgeable and dynamic middle level managers for this country.

As mentioned earlier, internship is one of the important components of the 4 year BBA Program. It not only provides the platform for the BBA products to do the self-evaluation of them in the practical business world but also act as a feedback forum for the policy makers of the Tribhuvan university to revise the course as per the requirement and need of the changing business world.

As per the course requirement of the BBA program every eighth semester student should prepare the internship report after the completion of the two months internship in the institution and the students of Shanker Dev Campus are not the exception. Being the student of SDC, I cannot be the exception. Since I completed the internship in Nepal Stock Exchange, this report is the outcome of the valuable real life experiences I obtained during the internship in that organization. Getting involved in NEPSE as an intern in Clearing and Settlement Department I confront real job-place experience and got the chance to feel the different situations from the perspective of both the employees and the customers. This internship had been fruitful because it had helped me to see the same things from the two opposite directions and find the difference in the perception of these two completely opposite sides as a neutral observer.

This is a report on the Clearing and Settlement mechanism of only stock exchange and its member broker, and since I had completed my internship from the three different organization named NEPSE, Secured Securities and Central Depository System and Clearing Limited all the details related to the Clearing and settlement activities of those organization.

1.2 Objectives of the Study

The internship program in BBA is primarily designed to the students to enable them as grounded career persons who already know the real-life working situations and had already felt the pressure of the job place environment. It helps the students to be prepared for the future through the little knowledge gained from the two months of the job-like experience. It is also a platform to show the ability to mold the theoretical knowledge learnt throughout the BBA program as per the requirement of the job placement. All of these things can be jotted down given the following points in nutshell below:

• To present the understanding of the securities market in Nepal and the functioning of NEPSE.

• To share the understanding gained on the functions and activities performed by the clearing and settlement department at broker firm, NEPSE and CDSC Limited.

• To share the experience of the practical exposure and understanding of the institutional working environment.

• To present the lessons learnt regarding the relationship of the theoretical knowledge with the practical work experience gained.

1.3 Methodology

Completion of internship is a combination of the different types of activities. It starts from the selection of the organization for the internship, performance of different kinds of activities and placement in different parts of the organization and at last collection of various primary and secondary data for the preparation of the report. In terms of data collection both primary as well as secondary source had been used. In case of primary source, observation and personal interview with the staffs are used and in case of secondary source, the brochures, published reports and documents, website of the bank and other related websites had been used.

1.3.1 Organization Selection

Selection of the organization tends to be the most crucial part of the internship because success in the fulfillment of the objectives of the internship completely depends on the type of the organization that had been selected. So, initiation was taken in doing the internship in Nepal Stock Exchange because it is only stock exchange of Nepal facilitating the trade of securities in the secondary market and is the organization that provides the scope for the intern during the internship. The internship in NEPSE was possible only after dropping the recommendation letter of the college.

1.3.2 Duration of Internship

The duration of internship has been defined for 2 month or 6 credit hours of working time at the organization by Tribhuvan University (T.U.), Faculty of Management (FOM). So, in order to fulfill this requirement, internship was done for two months. It was the enough duration for a Bachelors’ level student to understand the future workplace environment.

1.3.3 Placement

The stint of the internship was from 3rd of Ashar to 26th of Shrawan i.e. eight weeks. As NEPSE believe in specialization rather than generalization, placement was made in a Settlement and Clearing Department throughout the internship period. However, intern was sent to the broker firm and Central Depository System and Clearing Limited (CDSC) to get the complete knowledge of overall settlement and clearing mechanism of the stock market which was useful in understanding the mechanism of the clearing and settlement in detail.

Table 1.1 Placement Table

Working Periods (Weeks)	1	2	3	4	5	6	7	8
Activities	1	2	3	4	5	6	7	8
At NEPSE
At Secured Securities
At CDSC

1.4 Limitations of the Study

• This report had been prepared by using the limited information that had been gathered during the internship period.

• It is based on the personal understanding of the interne regarding the operation of secondary market during the internship period.

• Time and resources constraints are the major limitations of this report.

• Lack of enough time of the senior officers to provide the complete guidance to the internee during the internship period.

CHAPTER TWO

INTRODUCTION OF THE INDUSTRY

2.1 Introduction

Securities markets are markets in which users of finds raise funds through new issues of financial instruments such as bonds and stocks. Due to the lack of sufficient fund to finance the business plan the securities are issued. Thus security market plays a key role in channeling funds from savers to investors.

The securities market is broadly divided into Primary Market and Secondary Market.

• Primary Market

Primary market is the market in which the corporations raise funds through the new issues of securities which are referred as Initial Public Offering (IPO). These primary transactions are arranged by the Investment banker who serves as an intermediary between the issuing company and the investors. The investment banker reduces the risk and cost of creating a market of its securities to the issuer.

• Secondary Market

Once the financial securities are issued in primary market, they are then traded i.e. re bought and resold in secondary market. Secondary market provides the liquidity to the financial securities. It provides a platform for the investor to resell and repurchase of the securities. The transaction in secondary market is facilitated by the security broker.

The various types of securities market are discussed below:

a) Money Market

b) Bond Market

c) Mortgage Market

d) Foreign Exchange Market

e) Derivative Market

f) Stock Market

• Money Market

This market trades the debt securities or instruments with maturities of less than one year. This type of market includes the securities issued with shorter maturity period and to fulfill the immediate cash need of an organization. The various money market instruments are listed below:

 Treasury Bills

 Federal Funds

 Repurchase Agreement

 Commercial Paper

 Negotiable Certificates of Deposit

 Banker Acceptances

• Bond Market

Bond market can be defined as market in which bonds are issued and traded. Bonds are long-term debt obligations issued by corporations and government units. Bond market assist in the transfer of funds from individuals, corporations, and government units with excess funds to corporations and government units in need of long-term debt funding.

Instruments of bond market are as follows:

 Treasury Notes and Bonds

 Municipal Bond

 Corporate Bond

• Mortgage Market

Mortgage market can be defined as the market which issues the mortgage and later securitize it to trade in the secondary market.

Mortgages are the loans to individuals or business to purchase a home, land, or other real assets backed by specific piece of real property.

• Foreign Exchange Market

Foreign Exchange Market is defined as a market in which cash flows from the sale of products or assets denominated in a foreign currency are transacted. This market depends upon the foreign exchange rate which is highly volatile thus has high foreign exchange risk involved in this market.

• Derivative Securities Market

Derivative security is a financial security whose payoff is linked to another previously issued security. The market in which these derivative securities are traded is called derivative securities market. The various instruments of Derivative Security Market are as follows:

 Forward Contract

 Futures Contract

 Options

 Swaps

• Stock Market

Stock Market can be defined as a market that allows suppliers of fund to efficiently and cheaply get equity funds to public corporations. In exchange, the fund users give the fund suppliers ownership rights in the firm as well as cash flows in the form of dividends.

Stock market is a very important part of the economy and serves various functions to various elements of the economy such as investors, corporations as well as economy in a whole.

2.2 Instruments of Stock Market

The two basic instruments of stock market are common stock and preferred stock.

• Common Stock:

Common stock is a type of securities that represents the ownership of a company and also known as ordinary share or equity share. The return on common stock investment comes from either of the two sources- the periodic receipt of dividends and capital gains. Common stockholders enjoy a number of rights such as; dividend rights, assets rights, preemptive right, voting rights etc. It is traded on OTC and organized exchange.

• Preferred Stock:

Preferred Stock is a hybrid security that has characteristics of both a bond and a common stock. Preferred stock is similar to common stock in that it represents an ownership interest in the issuing firm, but like a bond it pays a fixed periodic payment in the form of dividend. Preferred stockholders are paid dividend only when profits have been generated and all debt holders have been paid.

It is further divided into two types:

i) Cumulative Preferred Stock:

It is a type of preferred stock in which missed dividend go into arrears and must be made up before any common stock dividends can be paid.

ii) Non-cumulative Preferred Stock: It is a type of preferred stock in which dividend payments do not go into arrears and are never paid.

2.4 History of Stock Market in Nepal

The history of security market in Nepal dates back to 1937 when Biratnagar Jute Mill and Nepal Bank Limited floated their shares in the Market. The Company Act was introduced in 1964. Government Bonds were issued for the first time in 1964. And the Securities Exchange Centre Limited was established in 1973 to facilitate and promote the growth of capital markets, with the initiative of the government of Nepal and Nepal Rastra Bank. It was the only capital market institution that undertook the responsibilities of brokering, underwriting, managing public issue, creating markets for government bonds and other securities. It was converted into Nepal Stock Exchange (NEPSE), under a program to reform capital market only in 1993.

Till the date NEPSE is the sole stock exchange of Nepal with 219 companies listed in the secondary market for trading. NEPSE operates under the Securities Act 2007 and is regulated by Securities Board of Nepal (SEBON).

CHAPTER THREE

INTRODUCTION TO THE ORGANIZATION

The internship was completed in three different organizations with a motive to understand the overall mechanism of the settlement and clearing activities of the NEPSE. This chapter deals with all three organizations in detail.

3.1 Introduction of Nepal Stock Exchange Ltd.

NEPSE is the first and the only secondary capital market in Nepal. The introduction of Capital Act in 1964 laid the foundation for the formation of the capital market institution in Nepal. As a result Securities Exchange Center was established in 1973 with an objective to facilitate and promote the growth of the capital markets in Nepal. It was the only capital market institution that was established with the initiative of government of Nepal and Nepal Rastra Bank. It took the responsibilities of brokering, underwriting, managing public issues, creating market for government bonds and other securities. Later it was converted into Nepal Stock Exchange (NEPSE), under a program to reform capital markets in the year 1993.

NEPSE operates under the Securities Act, 2007.It is regulated by the Securities Board of Nepal (SEBON). There has been a number of changes occurred in the organization since its establishment so as to upgrade itself and also to provide the efficient and effective services. In August 2007, the company introduced automated trading system and later in May 2008 it turn itself from the not for profit organization to a profit seeking organization.

Vision

NEPSE contributes to creation of the wealth of nation by adding value through trading of securities.

Mission

• Actively pursue strategies that contribute to the growth of capital market.

• Provide facilities to trade equities, bonds, debt securities and derivatives.

• Promote corporate culture that encourages employee commitment, creativity and team work

• Maintain a balanced and responsive regulatory framework that will enhance market integrity and investor confidence.

• Focus on customer orientation, strike for organizational excellence and promote professionalism within the industry.

Goal

• To impart marketability and liquidity to the listed corporate securities along with registered government securities.

• To facilitate transactions in its trading floor through member, market intermediaries, such as broker, market makers etc.

• To list corporate as well as government securities like equity shares, bonds etc.

Objectives

The basic objective of NEPSE is to provide liquidity to the government bonds and corporate securities by facilitating transactions through intermediaries, such as, brokers, market makers, etc. The other important objectives of NEPSE are to protect investor’s rights and develop a secondary market, as prescribed in the Memorandum of Association (MOA) and Article of Association (AOA) of NEPSE.

Functions

The main function of NEPSE is to provide trading floor for trading on securities. Beside this prime function, NEPSE performs the following:

• Provide trading floor for the listed securities.

• Enlist corporate as well as government securities like shares, preferences shares, development bonds and corporate bonds.

• Supervise and regulate its members.

• Timely dissemination of information.

• Act as a front line regulator for members.

Capital Structure

NEPSE has increased it authorized capital from Rs. 50 million to Rs. 160 million in May 2008 to meet the requirement of Securities Market Operation Rule, 2064. As per the AGM decision and approval from Ministry of Finance, the paid up capital of NEPSE has authorized capital of Rs. 300,000,000, issued capital of Rs. 200,000,000, and paid up capital of Rs. 200,000,000

Ownership Structure

The Government of Nepal holds the significant number of NEPSE’s SHARES (58.66%). Nepal Rastra Bank. Nepal Industrial Development Corporation and members hold the second, third and fourth largest shares respectively. The number and percentage of shares holdings are shown in table 3.1 below.

Table 3.1 Ownership Structure of NEPSE

S. No	Owners	No. of shares	Percentage (%)
1	Government of Nepal	204820	58.66
2	Nepal Rastra Bank	120805	34.60
3	NIDC	21375	6.12
4	Members	2150	.62

Fig 3.1 Ownership Structure of NEPSE

3.1.1 Organization Structure of NEPSE

Structure of Board of Directors

The Board of Directors in NEPSE constitutes of members representing different sectors. As per the recent revision, the composition of BOD comprises seven members: two members including a chairman from Government of Nepal, two from Nepal Rastra Bank, one from NIDC and the other one to be nominated by BOD, will be expert in the capital market. General Manager of NEPSE will serve as a director.

3.1.2 Introduction to Various Departments of NEPSE

• Listing Department

This department is responsible for the listing of the various companies in the secondary market. The department makes the documentation of the various legal requirements such as company registration certificate, details of the shareholders, details of the board members, companies last two years financial reports, etc. This department collects information from the company and forwards it to the administration department for the approval of listing of the company to trade in the secondary market.

• Clearing and Settlement Department

This is one of the major functioning departments of NEPSE which is responsible for carrying out the various activities in an organization. This department can be divided into two parts:

Settlement Department: Settlement department is one of the parts of the clearing and settlement department of NEPSE. This department makes the verification and approval of the transactions occurred in the secondary market daily. The department controls the trading activities of the broker firms by making the verification of the securities documents and payment made by both the parties. The activities and functioning of this department is explained in Chapter 4

Clearing Department: It is other part of clearing and settlement department that carries out the function of making the verification and approval of the ownership transfer and blank transfer of the securities by the owner of the securities. This department has the function to sort out the mistakes or fraud done in the transfer of certificates by the seller to the buyer of the securities and control such activities through verification of original certificates with that of the system entry made by the broker.

• Account Department

Account Department in NEPSE has the similar function as the account departments in other organization. It is responsible for maintaining the details of the accounting activities performed in an organization with the clients, companies, brokers and other parties. The activities performed by the account department are listed below:

 To keep the record of the financial activities occurred in an organization for a given period of time

 To manage the funds and keep the track of all activities relating to finance.

 To collect vouchers, cheques, drafts etc. from the clients, agents, companies, etc.

 To make payments to the creditors, selling brokers, staffs, employees etc.

 To prepare the financial report of the financial activities at the end of a fiscal year.

• Surveillance Department

This Department is one of the vital parts of the organization which is responsible for controlling the activities of the broker and the market. This department watches the market trends and activities for the transaction of securities. The major functions of surveillance department of NEPSE are listed below:

 To watch the price fluctuation of the securities while trading.

 To control the market driving by the group of investors or brokers.

 To keep the close eye in the activities of the broker firms

 To listen complains and grievances of the clients against the fraud and irresponsible act of the broker house.

 To keep the record of the agents of the brokers coming to NEPSE for the settlement and clearing activities.

 To suggest the management for the quick action against the illegal and irresponsible activities of the broker firms.

• Administration and Trading Department

This department comprises of the administrative activities, trading activities, human resource activities etc. in an organization. The department is responsible in handling the administrative activities such as keeping the details of the employees, their work responsibility, authority and responsibility. It also handles the trading activities made by the broker. The administration department is responsible for making the letters to take back the punishments in the form of blockage to the trading of the specific brokers who fail to meet the settlement criteria as specified by the rule. Besides, it also handles the human resources activities such as recruitment of the new employees, announcement of vacancies, keeping records of current staffs and their post and responsibility, etc.

• Family Transfer Department

NEPSE allows the transfer of the securities from one person to another person within the family through the mechanism of family transfer without the involvement of broker or the secondary market. This activity is performed by the family transfer department of NEPSE. This department collects the request from the individual client for the family transfer along with the detail of the new owner, relationship with the prior owner, etc. This department reduces the necessity of making the transaction of securities in the secondary market for the transfer of securities within the family and thereby saves the broker’s commission involved.

• Information Technology Department

NEPSE has introduced the Automated Trading system since 2010 where all the transactions are carried out in the screen based online system. Thus there is a vital role of Information and Technology Department of NEPSE. This department is mainly concerned with maintenance of system server, technical problems and software related issues of an organization. If the broker fails to meet the settlement criteria, he is made out of the trading through this department only. It blocks the trading of such broker firm. On the fulfillment of criteria, the blockage is removed through this department only on the instruction of the administration and trading department. This department is responsible for the maintenance of the server at NEPSE; protect it from the external threats of hacking, manipulation and damage. Thus, IT department has a very sensitive and important role in an organization.

• Securities Available for Trading

Currently NEPSE facilitates trading in the instruments such as common stocks, preferred stocks, corporate bonds, power bonds, government bonds and mutual funds.

3.1.3 Listing

Listing, which is one of the major functions of NEPSE, is a process of admitting different types of securities to be traded on the floor of stock exchange. Listing is the first step towards the secondary market which provides liquidity and marketability to the scripts issued to general public at primary market. In 1994, NEPSE started its trading with 62 listed companies. From 2005 government bonds are being listed and traded at NEPSE floor. At present there are 219 companies listed in NEPSE. There is also a provision of delisting the companies which does not comply with the legal requirement. The listing fees and annual fees for equity are listed in the annex.

Classification of Listed Companies

As per the provision provided by Listing Byelaws, the total companies listed with NEPSE can be classified as Group A and Group B. NEPSE classifies the listed companies at the end of Magh (Mid-January to mid-February) every year. The companies which comply with the following conditions are classified at Group A.

• Number of shareholders must be more than 1000.

• The company must be in profit at least for the last three years.

• Corresponding companies must provide their audited or provisional financial reports till Poush (December – January) end of the fiscal year.

• The paid up capital of the company must be 20 million.

• Book value per share must not be less than the paid up value.

The companies which do not comply with the given requirements are classified at group B.

3.1.4 Trading System

NEPSE is a fully automated order driven market having continuous auction during trading hours.

Automated trading mechanism and its major features:

NEPSE has replaced the open out-cry trading system with fully automated screen based trading system (ATS) since 24TH August, 2007 under the CFG project of Government of Nepal aided by ADB. The system is able to eliminate all possible human errors as seen in the earlier open out-cry system. Several international practices are incorporated to make the system internationally applicable and modifications are also made to customize the existing rules and regulations of the country. Therefore the following features are found in the automated trading system.

• Client Management

Client management enables a broker to create a client. Without creating a client, the broker will not be allowed to place order for that particular client. The broker has to insert various details of the client out of which client code is a unique code for that particular client for a particular broker. After a broker receives the order the broker has to place order for that client on FIFO basis of the order registered by the client's office.

• Order

It is an expression of interest to either buy or sell a specified of stock either price or at the current market price. This order is given by the clients to the licensed brokers. There is an order entry form in the system through which the brokers place the purchase or sell order. All the required information either for purchase or for sell of a stock should be submitted by the broker.

Generally four types of order can be placed in the system

 Regular:

An order which is completed on the exchange and that confirms the order of lot size or greater than that.

 Odd-Lot:

An order which is completed on the exchange and that confirms the order less than lot size.

 Manual:

An order which is placed by the brokers and is reported individually by the buying and selling brokers.

 Block:

An order which is placed by the brokers and confirms to the minimum block trade specified by the exchange and is reported individually by the buying and selling brokers.

• Price

It is the price, which the buyer has quoted in his/her buy or sell order. The investors as usual can quote in three ways in their order forms. They can quote fixed price, price in range or market price. The brokers if find the price within range they enter the details to execute the transactions. In present system the order entry form in computer has been developed to indicate the price either in limit or market. If the price is given in range they will insert the best price for clients. The broker must always attempt to execute the transaction to protect their client's interest. If the investor is a seller s/he must attempt to execute the transaction at higher prices and if s/he is buyer the member broker must attempt to buy at low price. It is the negotiation process through which they execute the transaction.

If the price is market the broker will execute the order at market price. It means buy or sell the shares at market price.

• Execute At

This represents the phases of trading when to execute the order. There are three phases during which the broker can place the order to execute the transactions. Such phases are:

 At the Open (ATO):

ATO indicates the order should be executed when market opens. In order to execute the transaction at ATO the member brokers have to place the order to execute it at ATO. All the ATO orders will be accumulated in the system till ATO execution time and after the time reaches the ATO orders will be executed at the best price at the opening of transactions. ATO gives the price, quantity and time priority for the execution. At present NEPSE gas set 11:30 A.M TO 11:55 A.M., during which brokers can place ATO orders. The engine calculates the best price and matches the order at 12:00 noon i.e. when market opens.

In this case price can be quoted within the range of 5% of previous close price. Once the ATO phase is over price can be quoted within the range of 2% of LTP. ATO determines the opening price for the stock. If there are no matching ATO orders for a stock the open price of the stock will be equal to the previous close price.

 Continuous Trading:

This is the phase that indicates the orders should be executed while the market is in progress.

 At the Close (ATC):

This is the last phase that indicates the order should be executed when the market closes. The system has provided facility to generate the ATC price of a stock either by taking the average of the price of last "n" transactions or the average of the price of the last n minutes.

Currently NEPSE adopts the average of last n transactions where n equals to 1 i.e. the LTP of the stock at close is the ATC price or closing price.

• Retain Until

The customer can give the order to retain until the specified period as below unless it is executed.

 End of Day (EOD)

This indicates the placed orders if not executed will be retained until the end of today.

 Good till Cancel (GTC)

This indicates the order if not executed should be retained until it is canceled. This system has provided the facility for exchange to set the time period in days till which the pending orders can be retained in GTC.

• Conditions

This specifies the conditions under which the order could be executed. The conditions are as below.

 None

This indicates there are no conditions for execution of orders.

 Immediate or Cancel (IOC)

This condition indicates that the orders should be executed in full or part immediately the unexpected order will not be sent to public order book but cancelled immediately by the system.

 Fill or kill (FOK)

This condition indicates the order must get executed entirely or cancelled immediately. The unexpected order will not be sent to Public order book but killed (cancelled) immediately. NEPSE has modified the system allowing entering the quantity of a stock to be traded either at the multiple of lot size or greater than that.

 All or None (AON)

This condition indicates the order must get executed entirely & if not executed the order is sent to public order book. In this condition too, NEPSE has modified the system allowing entering the quantity of a stock to be traded either at the multiple of lot size or greater than that.

• Market Depth

It is the provision, which the stock exchange has made to facilitate the bid and offers. Under this provision the member broker before inserting the bid and offers for certain price for the bid and offers for certain quantities at certain price for the particular company can view the bid and offer placed by other brokers. This not only facilitates the negotiation but also contributes for the execution of transactions at market price.

• Settlement

NEPSE has adopted a T+3 settlement system. The settlement will be carried out on the basis of paper verses payment. The trading is done at "T" and at T+1; the buying brokers have to submit bank vouchers for settlement with covering letter. At T+2, the selling brokers must submit share certificate with covering letter. At T+3, NEPSE prepares to bill for payment and this will be forwarded to the bank.

Once the settlement is done the buying brokers with the consultation of the clients must decide and present the purchased shares if they want to record it as blank transfer. This must be completed within T+5.

• Blank Transfer

Under this mechanism an opportunities to derive the market benefit is provided. But presently, the buying brokers must complete the BT process within T+5. The transactions that are executed can be recorded in different way and NEPSE has considered all possible retention. The followings are the major key points to be considered.

 This is related only with buy of the securities.

 The buyer may decide to have market benefit either to have capital gains or to minimize the loss.

 In order to do this s/he may partly send for name transfer or may register it in blank transfer.

 If s/he register total purchase in blank transfer and can put for sale and if only the part of the shares are subscribed then s/he can handover the part and the part can be forwarded for name transfer to the concerned company. In order to do this s/he has to cancel the blank transfer for that portion.

• Trading Hours

Trading on equities takes place on all days of week (except Saturdays and holidays declared by NEPSE in advance). On Friday odd lot of ordinary shares trading is done. The trading hours of the board load equities begins at 12:00 noon and market closes at 15:00 pm on all the working days except Friday. However, the trading hours of odd lot equities begins at 12:00 noon and ends at 13:00 pm only on Friday.

• Price Range

Price Range is applicable on individual securities. The trading of the individual securities are not halted but allowed to trade within the price range.

The price band is 10% of previous close on either way. During the ATO (At the opening) session the range is 5% on either way of Previous Close Price. After the band is 2% on either way of the Last traded price till it reaches to 10% of the previous close.

• Circuit Breakers

NEPSE started to use circuit breaker for a chance of price in trading of an individual share on a day since August 2006. If a price of a share changes more than 10% in its trading in a single day, the trading of the share is halted by using circuit breaker. This rule of halting the individual share to trade for the day has been amended later and the trading could be done within a price range of 10% change on previous day's closing price. NEPSE has implemented index-based circuit breakers with effect from 2064/6/4 (21 September 2007). In addition to the circuit breakers, price range is also applicable on individual securities.

 Index-based Trading Halt

The index-based trading halt system applies at 3 stages of the NEPSE index movement of 3%, 4% and 5%. These circuit breakers when triggered bring about a trading halt in all equity.

• In case of 3% movement either way, there would be a market halt for 15 minutes if the movement takes place during first hour of trading i.e. 13:00 hours. In case this movement takes after 13:00 hours there will be no trading halt at this level and market shall continue trading.

• In case of 4% movement either way, there would be a market halt for half an hour if the movement takes place before 14:00 hours. In case this movement takes after 14:00 hours there will be no trading halt at this level and market shall continue trading.

• In case of 5% movement in either way, trading shall be halted for the remainder of the day.

• Brokerage Commission

The brokerage commission rate of 1.5% to 1% has been reduced at the range of 50-30 % to the rate of 1% to 0.7%. The detail of the commission is presented in an annex.

3.1.5 Recent Reforms in the Secondary Market

With view to continue market as well as institutional reform, NEPSE have taken following measure.

• Automated Trading System Introduced

The Automated trading system (ATS), an internationally compatible trading system, was formally introduced on 24 august, 2007. In order to adopt the ATS, NEPSE made an agreement with the British Company Comdaq Limited in November, 2006 under the Asian Development Bank (ADB) loan assistance project- Corporate and Finance Governance (CFG) at the cost of 300 thousand US dollar. Now with the introduction of ATS, the trading on NEPSE has been fully modernized.

• Introduction of CDSC

Central Depository System and is a paperless trading mechanism introduced by NEPSE and inaugurated on 31st March 2011. This system is yet under progress and has not started its operation. It is believed that with the trading through CDSC there can be a saving of time and cost involved in the clearing and settlement mechanism. This system will help to remove the burden of maintaining the papers and documents of securities and the trading will be fully automated. NEPSE has targeted to start the clearing and settlement through CDSC from the beginning of 3rd quarter of this fiscal year.

• Trading Through WAN Started

After the introduction of ATS and with the initiative and guidance of NEPSE, member brokers of NEPSE have started trading from their office through Wide Area Network (WAN) from 13 October, 2007. Due to the extended facility, now stock broker do not have to come to the NEPSE's trading floor, they can post their order to sell or buy shares from their office. All brokers have been working from their own office since June, 2008 to get access a broker must have screen and room for investors, separate rooms along with separate computer for clients' order entry, settlement and most provide up to date information to the clients.

• Circuit Breakers and Market Halt System Introduced

NEPSE introduced a string of measure to stabilize the volatility of the stock market. For this it has implemented circuit breaker in 2006 as well as market halt system (which have been talked about earlier).

• Secondary Trading of Government Bond Started

NEPSE started the secondary trading of government bonds in December 2006 in order to provide liquidity to government bonds. The secondary trading of government bond has added new dimension to the country's capital market.

• OTC Market

With a view to provide further access to the investors, NEPSE OTC byelaws 2065 with the approval of Securities Board of Nepal started the over-the-counter (OTC) market from 4 June 2008 to give shareholder a chance to sell or buy the shares of companies that are de-listed and that are not listed on NEPSE for failing to meet the listing criteria. This has added a new dimension in the capital market in Nepal.

In the OTC Market one does not have to go to brokers to trade shares; one can come to NEPSE and trade, paying a commission of 2 % for transaction of up to Rs. 25000, 1.5% for transactions of above Rs 25000 but under Rs 500000 and 1% for transactions of over Rs 500000.

• Trading Hours Extended

From 19th December 2007 NEPSE has increased the trading hours due to increasing trading pressure to three hours the previous two hours which has in vogue since NEPSE's inception in 1994. The trading floor at the NEPSE – from the beginning- has been opening from 12.00 noon to 14.00, now it will be open another hour till 15.00. NEPSE has expected that investor in general and small investors in particular will be benefit from the increase in trading hours.

• Trading of Promoters' Shares

NEPSE began trading promoters' shares on 31 March 2008, adopting a different price quoting mechanism for the first trading of promoters' shares of the listed companies. For the first trading, the price of the promoters' share of a company that has a positive net worth could not be less than half of five times its net worth per share or half of the current market price of the ordinary share, whichever is low. Similarly, in the case of a company that has a negative net worth, the first trading price couldn't be below half of the current market price of the ordinary share. Earlier, one could have traded the promoters' shares on the basis of the market price of the ordinary share. NEPSE expects that trading of promoter's shares will make the capital market more vibrant and stabilizes the prices of ordinary shares.

• Sensitivity Index and Float Index Introduced

In order to provide market performance of 'A' graded listed companies Sensitive Index was started to publish since the beginning of 2007. Similarly, NEPSE float index and sensitive float index was started to publish mainly based on the shares floated to public offerings (IPO).

3.1.5 NEPSE in Facts and Figures

The table 3.4 represents the facts of NEPSE based on last five years data.

TABLE 3.4 NEPSE at Facts

Major indicators	Fiscal year
Major indicators	2006-07	2007-08	2008-09	2009-10	2010-11
Trading amount ( RS in billion)	8.36	22.82	21.68	11.85	6.67
No. of shares traded ('000)	18147	28599	30547	26231	26240.39
No. of listed shares('000)	246504	321131	637868	821746	1033674
Market Capitalization (Rs in billion)	186.30	366.25	512.94	376.87	323.48
No. of listed companies	135	142	159	176	209
NEPSE closing index	683.95	963.36	749.1	477.73	362.85
Ratio of traded shares to total shares (%)	7.45%	8.91%	4.47%	3.19%	2.54%
Trading amount to market Capitalization(%)	4.49%	6.23%	4.23%	3.14%	2.06%
Trading amount/GDP(%)	1.15%	2.80%	2.19%	1.00%	0.42%
Market Capitalization to GDP (%)	25.60%	44.90%	51.74%	31.85%	19.48%

Fig: Line Chart on the NEPSE Index of Past Six Years

Group wise Market Capitalization at the end of FY 2068-69

3.2 Introduction to Secured Securities

3.2.1 Background

Secured Securities is the newly established broker firms with the broker id no 36. It is one of the few public limited brokerage firms with the shares issued to the limited shareholders. It is located in Putalisadak opposite to Shanker Dev Campus. The company started its operation from 11th of Bhadra 2068 and is able to establish itself as one of the successfully operating brokerage firm in Nepalese Market. The organizational structure of Secured Securities is as follows:

Introduction to Various Departments of Secured Securities

The brief introduction of the various departments of Secured Securities along with the functions performed by each department is discussed below:

• Human Resource Department

This department is concerned with the proper management and handling of the human resources of an organization. It is responsible for evaluating the employees, providing them proper training and knowledge, employee appraisal, recruit and selection of capable man power for an organization, etc.

• Finance and Account Department

Finance and Account department at Secured Securities is responsible for carrying out the finance related activities. It involves the collection of cash from the clients, managing the funds, making the payments to the stock, paying out the cash to the clients, keeping the records of all the financial and accounting activities of an organization, etc.

• Administrative Department

Administrative Department deals with the various administrative activities of an organization. It is responsible for attending the phone calls, taking the orders from the clients, opening the client id, taking the details of the clients, making telephone calls and inform the clients about the execution of trade, filing of the certificates of securities, ownership transfer letter, blank transfer letters, etc on behalf of client.

• Operations Department

This department is mainly concerned with the trading activities of the organization which involves buying and selling of securities in the secondary market. It takes the order of the client via administrative department and place the order in the market depth. The matching of the orders in the market leads to the execution of the order. This department has to work as per the instruction provided by the clients and make the trade as per the order filed.

• Clearing and Settlement Department

Clearing and settlement Department of secured securities carries out the numerous activities in an organization. It keeps the record of all the transaction occurred in a day, prepare bills and vouchers for those transactions, make the entry of the transaction occurred in the system, make the payments in the banks and keep the record in the system. This department is also responsible for getting the approval of the transaction from the clearing and settlement department at NEPSE. Besides, it also makes the further processing of the ownership and blank transfer mechanism on behalf of the client. This department also handles the function of making the approval of the signature of the seller giving a permission to sell the securities which is verified by the Registrar and Transfer Agent of the respective company.

In this way, the various departments work together to accomplish the activities smoothly and efficiently. Each department has its own working area, responsibility and authority. The proper management of the organization has led to the smooth operation of each department to achieve the overall goal of an organization.

3.3 Introduction of Central Depository System and Clearing (CDSC)Limited

CDSC is a paperless technology established under the CDSC Company Act 2063. It is the one and only Depository Company established under the sole ownership of Nepal Stock Exchange Limited. The company has Authorized Capital of Rs. 50 Corers and the Issued Capital of Rs 30 Corers. CDS and Clearing Limited, a company established under the company act is a company promoted by Nepal Stock Exchange Limited (NEPSE) in 2010 to provide centralized depository, clearing and settlement services in Nepal. The company is inaugurated on 31st March 2011.

The main objective of the company is to act as a central depository for various instruments (Equity, Bonds, and Warrants etc) especially to handle securities in dematerialized form. This organization is entrusted with the safekeeping, deposit, and withdrawal of securities certificates and transfer of ownership/rights of the said instruments. The depository functions will be performed by the company under the securities regulations of Securities Board of Nepal (SEBON).

3.3.1 Role and Functions

CDS and Clearing Limited perform its functions through a network of Depository Participants (DP's) who interact with investors. Further the system has the clearing system for clearing members of NEPSE for settlement and for issuers and RTAs for de-mat and shareholder's functions. The core functions carried out are:-

 Enabling the deposit and withdrawal of securities through a process called the dematerialization and re-materialization to and from the depository.

 Maintaining the investors holding in the electronic form.

 Effecting settlement of securities traded on the stock exchange.

 Carrying out settlement of 'off market trades'.

 Providing secure and convenient electronic procedures for pledge of securities.

 Advising periodically to the Share Registrar / Issuer about the beneficial owners of the securities.

 Electronic credit of securities allotted in public issues, right or bonus issues or during any other corporate actions.

 Freezing of de-mat accounts, so that debit from the account are not permitted.

 Power of Attorney, nomination facility for de-mat accounts.

3.3.2 Parties Involved in CDSC

The parties involved in the CDSC are as follows:

 Beneficial Owner (BO)

 Depository Participant (DP)

 Registrar and Transfer Agent (RTA)

 Issuer

 Stock Brokers

1) Beneficial Owner (BO)

The beneficial Owner of the CDSC is the investor or client who has opened De-mat account through the Depository Participant and has acquired the securities in the electronic form that can be traded electronically. Each client is provided a BOID through the respective DP. The BOID comprises of 16 digits identity number. A BO can have one or more BOID each with unique code. The BOID is in following form:

The first 8 digits represent the DPID and the last 8 digits represent a client ID

2) Depository Participant (DP)

Depository Participant is an important party in the CDSC which is responsible to provide the following services to the client:

 Opening De- mat account of the client

 Dematerialization of securities

 Re materialization of securities

 Keep proper record of the securities in electronic form

 Transferring the securities to the BO’s account on the request of the BO.

 Keep the record of the over the market transaction of the clients

 Dematerialization of the IPO issued by the issuer in the respective De-mat account of the client

 Collection of the bonus, dividend, right shares, etc provided by the issuer to the client in the respective client account

 Facilitate the margin landing mechanism for the dematerialized securities

There are currently two DPs that are granted license by CDSC namely Ace Capital Limited and Civil Capital Market Limited.

3) Registrar and Transfer Agent (RTA)

RTA is the agent who appointed by the issuing company which keeps record of the issued shares and the shareholder. This organization is responsible for the verification of the signature during ownership transfer, sales etc. It also manages the dividend payments, right share distribution, bonus share distribution to the share holder on the behalf of the issuing company.

4) Issuer

Issuer is the one who issues the securities of the company so as finance the capital of the organization. It is a public organization which issues shares to the common people and provides them certain claim to the organization. The issuing company is provided with the ISIN (International Securities Identification Number) for each type of securities issued by the company. The securities are given 12 digits unique code which is in alphanumeric format. The format of ISIN is given below.

NP E 004 A 02 03 7

Here NP is a country code

E is for the Equity

004A is an issuer code

02 is the type of equity (preferred stock, common stock)

03 is the type of privileges under the equity (voting right, convertible features, etc)

7 is a check digit provided for the uniqueness of the ISIN

5) Stock Brokers

Stock brokers are the trading members appointed by the NEPSE. There are total of 54 stock brokers who have already taken license from NEPSE. However, only 50 of them have started their operation in the market. The role of stock broker is to facilitate the trading of the securities in the secondary market. The stock broker is also provided with an account in the CDSC. The broker can have only one D-mat account in the DP office. The broker is provided with two types of account by the CDSC named Pull account and withheld account. Pull account is maintained by the respective DP of the broker whereas the withheld account is maintained by CDSC itself.

3.3.3 Concept of Dematerialization and Re materialization

Dematerialization is the mechanism of converting the physical securities certificate into the electronic form. It is the electronic record of the ownership of the securities possessed by the beneficiary owner (BO).

Re materialization is the process of converting the electronic securities ownership in the form of certificate so as to hold the transaction for a while or to keep the ownership claim in the physical form.

After the beginning of the operation of CDSC it is compulsorily required to dematerialize all the share certificates. The mechanism of dematerialization is done by the Depository participant (DP) which is an independent organization regulated under the CDSC. Till the date there are two different DP established and functioning in the Nepalese market.

CHAPTER FOUR

ANALYSIS OF ACTIVITIES DONE AND PROBLEMS SOLVED

4.1 Background

During the Internship at NEPSE, involvement was diversified in many departments. However, the main focus was given to the Clearing and Settlement Department of the NEPSE, broker house as well as CDSC. Introduction and major functions of the various department of the organization included in internship are already discussed in the prior chapter. Thus this chapter mainly focuses on the department that was given a prime focus during the internship period and the activities performed as an intern.

4.2 Clearing and Settlement Department at the Brokerage Firm

Clearing and settlement department is one of the important departments of the organization that performs the wide range of activities. In a brokerage firm, this department is that part of the organization which directly deals with the clients and makes direct interaction with them. It is involved in taking the orders from the clients, keeping records of all the transactions occurred in a day, records of the today’s order book, maintaining the file system to keep the track of the share certificates provided by the customer for the placement of sell order, etc. After the placement of order by the client, the order is forwarded to the trading room, which is either executed or cancelled.

The executed orders are of two types: purchase order and sell order. Clearing and settlement department is responsible for maintaining the data entry for both the sell and purchase order executed. This department collects the share certificates from the seller client which has been duly signed by the owner of the share and verified by the respective Registrar and Transfer Agent (RTA) of the particular company.

This department is also responsible to make the online entry of the daily transactions in the server of NEPSE which includes the entry of the 15 digits transaction ID, number of shares, the series of the share certificate number along with the total capital gain earned during the transaction of the security. After the entry of the details of the seller by the respective selling broker, the particular share certificates are sent to the NEPSE’s settlement and clearing department for the further verification and approval. Also it makes the entry of the ownership transfer and the blank transfer of the certificates as per the request of the client.

Activities Performed and Lessons Learnt in Clearing and Settlement Department of Broker firm

• Creating Client ID

The new client who has not made trade through the firm in prior has to create a new ID. This work was done by making the client fill a client ID form that contains all the detail of the client to be filled along with a passport size photograph and a copy of citizenship certificate.

During this, lesson was gained about the importance of client’s information to the organization. Also, the provision of opening client ID for the minors was known and understood. It allowed knowledge to extract personal detail from the client for the ease of the organization.

• Attending Phone Calls and Handling the Client’s Order

Some clients make the order directly visiting the broker house whereas others provide the order details via telephone calls. The clients’ order was filled in an order slip and was forwarded to the trading section for the execution of the order

The idea of filling the order form, categorizing the types of order, communication skills were developed during the period.

• Communication of Information

The information about the clients’ order, order cancellation was forwarded to the trading section. Also, the clients were made informed about the execution or the cancellation of their order after the trading hours. The clients were requested to make the submission of necessary documents and amounts after the execution of order.

The activities were helpful in understanding the importance of information in an organization. The mistakes in taking the order could create a problem for the organization. Special concern was given to avoid such mistakes.

• Record Keeping and File Handling

The records of the daily transaction were maintained by making an entry in the computer and documents were filed for the future reference. Also, the certificates of the clients were filed in a proper manner based on the companies. The documents were made available to the clients on demand.

• Preparing Bank Vouchers and Bills

The bank vouchers were prepared for the payments of the purchase made in a day on the behalf of the purchaser client. Also, the bills popularly called “Chalaan” were prepared for both the buying and selling transaction. These Chalaans were duly attached with the bank vouchers and share certificates for the approval from NEPSE.

The activities performed during the period provided the knowledge about filling the bank voucher, importance of the transaction ID and the payment mechanism of secondary market. It also provided the idea of preparing bills and its significance in the future for the reference.

• Making the Entry of the Trade in the System

The entry of the details of the securities sold, bank vouchers and payments made, ownership transfer and blank transfer were entered in the system of NEPSE through the broker ID provided by NEPSE. The certificates were entered along with their serial number, quantity, purchase price, selling price owner’s name. The entry of bank voucher comprises of voucher number and amount of payment made.

The period was helpful in understanding the importance of the entry made in the system. The significance of correct entry was understood. The knowledge of handling the software and making the online data entry were gained. The mechanism of calculating capital gain tax was also understood.

• Forwarding the Certificates and Vouchers for Approval

The share certificates and Vouchers duly attached with the Chalaan of each transaction were forwarded to the NEPSE for the verification and approval. The team work was performed during the period. The approval must be done within T+3 days of transaction.

The team work was experienced which gave the knowledge of information communication and synergic effect. The concentration level was gained for the avoidance of mistake.

• Preparing Letter for Blank Transfer and Ownership Transfer

The letter for blank transfer and ownership transfer were prepared on behalf of the clients. The necessary fees for this were collected in prior from the client. The details of the clients were filled in the letter and the letter was forwarded to the NEPSE for approval

Two weeks in a clearing and settlement department of broker house was useful to understand mechanism of share transaction in secondary market. It provided an idea of how the clients are provided an identity before carrying out any transaction with the broker firm and the overall mechanism that occurs after and before the purchase or sales of shares in a broker firm. It helped to understand the legal compliance and the documents that must be fulfilled for the sales of shares in the secondary market. It was also helpful to understand the mechanism for the share transaction on behalf of the minors.

4.2 Clearing and Settlement Department at NEPSE

Being a regulatory body for all the broker firms in the security market, the clearing and settlement department of NEPSE is the one that verifies and approves all the activities done by the brokers during the transaction of the securities in the secondary market. This department is divided into two branches namely Settlement branch and Clearing branch.

Settlement branch is the one responsible for the approval of the shares certificates and the bank voucher submitted by the seller and purchase broker respectively. The verified share certificates are submitted by the respective broker agent to this branch which is then matched with the data entered in the system of the NEPSE by the buying and selling broker. If the data matched with each other, the approval of the transaction is done and in case of any difference, agents are demanded explanation and asked to make the necessary correction. Besides this, the bank vouchers are also approved in this branch only. The detail of the voucher number and the amount of the payment are matched and approved. After the completion of the approval and verification of the buying and selling transaction, the voucher received from the buying broker are forwarded for the payout to the account and billing department of NEPSE.

Clearing Branch is the one responsible for the approval of the ownership and blank transfer of the share certificates. The activities of OT and BT are initiated by the broker firm on behalf of the client which is to be approved and verified by the clearing branch of NEPSE. By law, if the certificates are not sent for ownership transfer it is necessary to make the blank transfer of the certificates before the further transaction of the security in the secondary market. This branch is mainly responsible for the verification of the certificates that are processed for the ownership and blank transfer. The securities that are processed for blank transfer are returned back to the owner after the approval whereas the certificate of securities presented for ownership transfer are processed to the investment banker of the respective company where the certificate is transferred on the name of the new buyer of the securities.

Activities Performed and Problems Solved

As NEPSE is a regulatory body of all the broker firms it controls all the trading activities performed by the broker firms. NEPSE is responsible for the verification and approval of all the transactions occurred in the secondary market via the various brokerage firms. It also acts as an intermediary between the brokers for exchange of securities with the trade amount. Some of the activities performed at NEPSE are listed below.

• Verifying the Certificates and Bank Vouchers

The certificates of the securities traded in the market were presented by the selling broker’s agent. The entry of the security detail was available in the system of NEPSE. The responsibility was to verify these certificates with the entry made in the system. Similarly, the bank voucher presented by the buying broker’s agent was to be verified. The amount of payment was closely inspected along with the voucher number and transaction code.

During this, understanding was gained about the requirement of signature verification of the seller for the selling of securities by the respective RTA. The essence of the security number, transaction code and the quantity of securities was understood.

• Approving the Transaction Detail Entered by Broker

With the matching of the securities certificates and bank vouchers as per the detail entered by the broker firm, the transaction was approved. This provided the broker the authenticity to the transaction that was conducted by them.

Carrying out this activity was helpful in understanding the software of NEPSE. Proficiency was gained in operating the settlement system along with the knowledge about the mechanism to handle the wrong entry made.

• Pay Out Entry for the Seller Broker

The securities whose certificates were verified and the bank voucher that were presented were sent for the further pay out mechanism. This allows the seller broker firm to process for the payment of the securities sold.

The other activities performed at NEPSE are as follows.

 Demanding explanation and suggesting the agent in case of any deviation in the documents presented and data entered in system

 Making the payout entry of the seller broker for the further processing of the payment mechanism

 Verifying and approving the ownership transfer letter processed by the client through the respective broker

 Approving the request made for the blank transfer of the certificate by verifying the details of shares certificates and certificate numbers as provided by the selling broker.

Five weeks in clearing and settlement department of NEPSE provided the knowledge about the checking of the authenticity of the share certificates and the buyers and sellers detail as provided by the buying and selling broker. This period exposed the intern to the challenge of sorting out the mistakes made during the transaction period and find out the mistakes or fraud made by the seller or the selling broker of the securities. It also provided the knowledge about the significance of T, T+1, T+3, T+7 days of the transaction and the actions taken in case of the default of the rule of settlement period.

4.3 Clearing and Settlement at CDSC

CDSC is a new and an upcoming sister organization of the NEPSE which is established to outsource the clearing and settlement activities of the NEPSE. This organization is yet to start its regular operation in the field of settlement and clearing and still under the practice phase to take the complete responsibility. With the dematerialization of all the securities in the electronic form, this organization is responsible for making the approval of the activities which is performed by the clearing and settlement department of NEPSE at present. It is claimed that the introduction of the operation of CDSC will reduce all the settlement period to T+1 day. The function carried out by the CDSC is similar to that of the activities performed in the clearing and settlement department of NEPSE.

Since the department has not begun its full operation, there was only the possibility of learning the mechanism of this new system, how it works and how it differs from the current clearing and settlement activities at NEPSE. NEPSE had conducted training session for the employees to visit CDSC and exchange the knowledge of current settlement and clearing mechanism with the up-coming clearing and settlement mechanism.

Understanding Gained During the Internship at CDSC

 Knowledge of Dematerialization and Re materialization

 The settlement mechanism of the new system of CDSC

 Knowledge of the various parties of this system and the functions and activities of each party.

 Understanding of the process to open, freeze and close the de-mat account

 The knowledge of various fees and charges that are to be incurred in the new system of clearing and settlement.

 Knowledge of ISIN(International Securities Identification Number), BOID(Beneficial Owner Identity number) and De-mat Request Form (DRF)

 Understanding of the mechanism of Margin landing by keeping the securities as collateral.

Though the operation of CDSC has yet not started, one week’s observation of the system provided the knowledge of the various new mechanism that are introduced in the new system, its various parties involved, benefit to the clients, the operation mechanism and the terms and terminologies which are new to the Nepalese market.

The various positive effects that a CDSC can bring in future was also understood and analyzed. In overall, the intern in CDSC was greatly helpful in experiencing the new system that is yet to be practiced and operated in the Nepalese Security Market.

CHAPTER FIVE

CONCLUSION AND LESSONS LEARNT

5.1 Conclusion

After the completion of this internship of two months, the real meaning of the work life and the actual pressure of the job had been felt. This feeling had changed the previous perception of the job-life. It had been a fruitful experience for the present as well as for the future also. The charm of the bankers’ life in the view of the public had been changed now and the reality of the charm backed by the intense pressure had been felt. The ‘to be known world’ had been known now and also a thought that, besides books and knowledge of the syllabic books there are a lot of things to be known and learnt, had emerged. It was really a great opportunity to know new kinds of people, new kinds of experiences, new kind of environment and a completely new atmosphere around us. It was learning by doing kind of opportunity and had been successful to make a change within myself.

Being in NEPSE as an interne wouldn’t be much interesting without the support of the NEPSE family. From them, I have learnt that the workplace is also a family for any worker and how important is it for the social wellbeing of the worker. I also got the chance to feel the closing pressure in the organization since I was there during the closing of the fiscal year 2068/2069. I also got the chance to get wider variety of knowledge due to the support of the NEPSE management along with Secured Securities staff and management.

While concluding this report, the interne is intensely satisfied with the internship and its outcome. This experience will not only be beneficial today but also in the future also when the interne should work in the real life

5.2 Lessons Learnt

The interne is able to learn various new knowledge as well as the practical implications of various theoretical knowledge after the two month internship exposure. All the lessons learnt can’t be express in the language form because much knowledge is related to the realization rather than the new knowledge. Anyways, the important lessons that the internee is happy to express in the word form are bulleted in the below points.

• Real-life Working is a very pressurized task and hence cool and calm mind is essential for success.

• Learned to speak, function and work in corporate way

• Learned the institutional culture and the values in the corporate world.

• Importance of effective communication in the job-place

• Interact and behave in a professional way to the clients to make them satisfied with your services

• Understood the trading mechanism in a whole and the way in which the stock price are negotiated in market depth

• Learned about the difference in the current settlement and clearing mechanism and the one to be introduced through CDSC

• Learned about the listing process of various companies in secondary market.

• Had an idea about the various party involvements in the secondary market.

• Learned to treat each individual differently because of the individual differences among them.

• Had an idea to handle the system of NEPSE that mainly deals with the settlements and clearing mechanism

Concluding this chapter with one saying “The best way of learning is by doing” by an unknown author is very much appropriate at this stage to express the lessons that had been learnt during the internship period. In internship practically the work is either observed or done practically, which are the best means of learning. So, the internship program is successful in bringing the change in the student closed in the boundary of the classroom by exposing them in the real and very difficult and challenging external job place.

ACKNOWLEDGEMENT

Exposure to the real life corporate environment has become an essential element of the academic programs in the present context due to the development of economies and increasing competition Preparation of any report is not as easy as it seems when the outcome is in the hands. It is a very rigorous task and requires a huge contribution and determination of the writer and the surroundings. This outcome in the hands of the reader had been prepared by the writer with the support of some very helpful hands. It would be the great dishonesty if they are not unnamed.

The constant support and inspiration of the management of the BBA program consisting Mr..............., the BBA Program Director, and Mr.................., the BBA Program Coordinator must be acknowledged. Similarly, this report wouldn’t be in this form without the supervision and guidance of the internee’s report supervisor, Mr............... . I express my heartfelt thankfulness to all of them as well as to all my other friends who supported me during the preparation of this report.

Also, I am thankful to every one of NEPSE, Secured Securities and CDSC limited who directly or indirectly supported me during the internship period and helped me to complete my internship successfully.

A series of revisions had been made in the effort of making this report perfect. But, some errors may go unnoticed and remains in the report but they won’t be repeated in the future if they are pointed out by the readers and the evaluator. The writer is always ready to accept the feedback for the further improvements.

..........................................

Name

T.U.Reg.No:7-2-39-29-2008

BIBLIOGRAPHY

Shrestha, M.K.,Bhandari, and D.B.(2007). Financial Markets & Institutions. Kathmandu: Asmita Publication.

Thapa, K.,Parajuli, B.(2011). Financial Institutions & Markets, Kathmandu: Januka Publication.

Saunders, A., and Cornett, M.M.(2010). Financial Markets & Institutions, New Delhi: Tata McGraw Hill Education Private Limited.

WEBSITES

www.google.com dated 15.09.2012

www.nepalstock.com dated 10.09.2012

www.cdscnp.com dated 25.09.2012

OTHERS

Nepal Stock Exchange Ltd (February 2012), Nepal Stock Exchange Ltd An Introduction, Kathmandu.

Central Depository System and Clearing Limited(2012), CDSC and Clearing Limited paperless technology, Kathmandu.

Date: 5th September, 2015

DECLARATION

I hereby declare that this internship report entitled “Clearing and Settlement Department” of Nepal Stock Exchange Ltd., submitted to ............college, Faculty of Management, Tribhuvan University is my original work done in the form of partial fulfillment of the requirement of Bachelors’ in Business Administration(BBA) eighth semester under the supervision of ................

......................................

BBA Eighth semester

T.U.Reg.No. 7-2-39-29-2008

List of Tables

Placement Table 4

Ownership Structure of NEPSE 12

NEPSE at facts 28

List of Figures

Ownership Structure of NEPSE ................................................................................................... 13

Line chart of past six year’s NEPSE indices ........................................................................... ...... 29

Group-wise transaction in fiscal year 2068/69 30

ANNEXES

1. List of the Broker Firms Licensed by NEPSE:

Serial Number	Firm Name	Code
1	Kumari Securities Pvt. Ltd	1
2	Kumari Securities Pvt. Ltd	1-RWS
3	Arun Securities Pvt. Ltd	3
4	Opal Securities Investment Private Ltd.	4
5	Market Securities Exchange Company Private Ltd	5
6	Agrawal Securities Private Ltd	6
7	Agrawal Securities Private Ltd	6-RWS
8	J.F Securities Company Private Limited	7
9	J.F Securities Company Private Limited	7-RWS
10	Ashutosh Brokerage and Securities Private Limited	8
11	Pragya Securities Private Ltd	10
12	Pragya Securities Private Ltd	10-RWS
13	Malla and Malla Stock Broking Company Private Ltd	11
14	Thrive Brokerage House Private Ltd	13
15	Thrive Brokerage House Private Ltd	13-RWS
16	Nepal Stock House Private Ltd	14
17	Nepal Stock House Private Ltd	14-RWS
18	Primo Securities Private Ltd	16
19	ABC Securities Private Ltd	17
20	Sagarmatha Securities Private Ltd	18
21	Nepal Investment and Securities Trading Private Limited	19
22	Nepal Investment and Securities Trading Private Limited	19-RWS
23	Sipla Securities Private Ltd	20
24	Midas Stock Broking Company Private Ltd	21
25	Siprabi Securities Private Ltd	22
26	Siprabi Securities Private Ltd	22-RWS
27	Sweta Securities Private Ltd	25
28	Asian Securities Private Ltd	26
29	Shree Krishna Securities Private Ltd	28
30	Trishul Securities and Investment Ltd	29
31	Trishul Securities and Investment Ltd	29-RWS
32	Premier Securities Company Private Ltd	32
33	Premier Securities Company Private Ltd	32-RWS
34	Dakshinkali Investment and Securities Private Ltd.	33
35	Vision Securities Private Ltd	34
36	Kohinoor Investment and Securities Private Ltd	35
37	Secured Securities Limited	36
38	Swarnalaxmi Securities Private Limited	37
39	Dipshikha Dhitopatra Karobar Private Ltd	38
40	Sumeru Securities Private Ltd	39
41	Creative Securities Private Ltd	40
42	Linch Stock Market Ltd	41
43	Sani Securities Company Limited	42
44	South Asian Bull Private Limited	43
45	Dynamic Money Managers securities Private Ltd	44
46	Imperial Securities Comapny Private Ltd	45
47	Kalika Securities Private Ltd	46
48	Neev Securities Private Ltd	47
49	Trishakti Securities Public Ltd	48
50	Online Securities Private Ltd	49
51	Crystal Kanchanjungha Security Private Ltd	50
52	Oxford Securities Private Limited	51
53	Sundhara Securities Private Ltd	52
54	Sri Hari Securities Private Ltd	56
55	Investment Management Nepal Private Ltd	53
56	Sewa Securities Pvt. Ltd.	54
57	Bhrikuti Stock Broking Co. Pvt. Ltd	55

Annex 2: Listing Fee and Annual Fee for Equity, Debentures and Mutual Funds

S.No.	Issued Capital	Listing fee	Annual Fee
1.	Upto Rs. 10million	0.20% or 15000	Rs. 15000
2.	Rs.10million- 50 million	0.15% or 45000	Rs. 25000
3.	Rs. 50 million –Rs100 million	0.10% or min. 75000	Rs.35000
4.	Above Rs. 100 million	0.075% or min. 100000	Rs. 50000