Mon, Apr 16, 2018 1:10 PM
13th April, 2018: 30th Chaitra, 2075: Celebrating New Year’s Eve
14th April, 2018: 1st Baisakh, 2075: Wishing Happy New Year, 2075
15th April, 2018: 2nd Baisakh, 2075: Semi- Online Trading Initiation in Nepal
The provided timeline is simply an overview of any random investor’s facebook news feed since last three days. It is of no doubt that the last few days were filled with the New Year’s uploads on social networking site. Today and yesterday, the social media is full of aspirations regarding semi online trading initiation. The former two is not the author’s ultimate concern. However, the last news has dragged interest of many investors, brokers, regulators, corporate giants, concerned authorities and the author did not remain untouched.
SEBON; the regulator body of secondary market published its circular on 13th April, 2018 encouraging brokers to initiate internet based trading system where investors can place buy and sell orders of shares. The trading system has been introduced with an aim to facilitate the participation of investors to make more convenient in capital market.
An online trading or semi-online trading indeed can be a big leap in the secondary market of the country. However, the debate rests on whether this new initiation can be termed as “online” or even semi-online. The answer is No!
To define, “online trading” refers to the purchase and sale of financial products using an online trading platform. The definition indicates the current initiation by broker houses is exactly online trading. However, there are certain features of online trading hidden within the definition. For a trading to be termed semi-online trading, it must complement at least one of the features of online trading system. However, not even one feature has been accompanied by Nepalese secondary market. Some of these features are:
-Online trading involves execution of orders by the investors on their own
-Online trading involves trading of bonds, shares, commodities, and international currencies
-Online trader has access to excessive research and data of the secondary market
The recent initiation carried out by SEBON and brokerage firms still involves employees of brokerage firms to enter data of the clients in the database. The order of buy and sell is simply being sent to brokerage firms via message, email, or app. This comprises replacement of face to face and telephone orders to internet based orders in the form of message, email or app. Investors still can’t execute orders on their own completely. So, how can the new initiation be termed as semi-online trading? Isn’t it rather an advance version of manual based trading system?
Besides, the secondary market in Nepal involves trading of only “shares” in particular. However, online trading encompasses a number of financial products such as bonds, shares, commodities, international currencies and many more. The new initiation yet does not facilitate investors in terms of trade of other financial products. Provided this, has the Nepalese secondary market reached the edge of semi-online trading?
Finally, when traditional trading platform goes online, the investors will have access to research, exhaustive analysis, knowledge and date on the current trends of secondary market. Such information promotes a trader understanding for intraday trading. However, in context of Nepal, the access of information on share market is still limited. If so, are you an investor in a semi-online trading platform?
Given all these, the current internet based trading does not satisfy any of the above mentioned features, can it be even termed as a semi online trading? The instruction issued by SEBON to facilitate traders through Broker’s Back Office Software is rather a manual based order system. It still involves human resources to enter data in the system and is not yet automated. The initiation of manual based system can be a means to achieve semi-online trading but cannot be termed as one. The manual (internet) based trading system will rather be a foundation for NEPSE to attain full-fledged automated online trading system.
It might be debatable whether to call this initiation a semi-online trading or internet based trading, however, its benefit isn’t debatable. The internet based trading has provided investors with an ease of trading without visiting broker’s office for every transaction. Any investors with access to internet facility can invest in the shares from any corner of the world. This directive from SEBON can be very beneficial to the investors. Such actions can attract more participants in the secondary market.
Investors with broker account can utilize the internet based trading through the following procedure:
The application form is free of cost. The Broker’s Back Office Software differs from one broker to another.
The internet (manual) based trading system is one step closer to semi online trading. The initiation undertaken by SEBON is undoubtedly a commendable approach. Such new steps have elevated hope among investors and they cannot wait for the forthcoming new ventures from the regulatory bodies. However, wouldn’t it be better to question ourselves before we fool ourselves by terming a mere internet based trading system as a semi-online or online trading system?
The era of internet based trading has begun, but we are yet far behind the era of semi-online trading…
Dear readers, have you placed your purchase and sale order via internet? Did you find it effective? Will this be convenient to you as an investor? Please do write in the comment section below.