Settlement of Bhadra 25 (Sept. 10) will happen today; How and why did NEPSE nullify 3,800 transactions?

CDS and Clearing Limited (CDSC) had previously issued a notice about the postponement of the clearing and settlement procedures in the transactions that happened in NEPSE on Bhadra 25, 2077.

Because of the technical issues in the online trading platform, the settlement of the transactions that were executed on Bhadra 25, Thursday was postponed until further notice.

By standard procedure, the settlement was supposed to be completed by Bhadra 29, 2077 i.e. last Monday.

Because of a frustrating day of grappling with TMS, NEPSE had reopened at 2:15 and closed at 5:15 on Thursday.

However, investors were baffled to see the stock charts updating even when the market was closed. They were suspicious that limited investors had access and were buying/selling shares while the market was theoretically halted. (We will cover more on this in another article.)

Also, because of the multiple issues in TMS, shares were sold multiple times. Basically, some buyers bought shares that did not exist at all.

Sharesansar called CDSC spokesperson Mr. Suresh Neupane to know more about this matter. He updated us that the settlement process of the trades on Bhadra 25 will be completed today. Following NEPSE's instruction, 3,800 transactions of that day will be nullified.

Note that NEPSE has instructed CDSC to nullify all the transactions before 2:15. And then, NEPSE itself gave CDSC a list of about 3,800 transactions to be canceled. Neupane thinks this list is the list of transactions before 2:15. However, he is unsure whether the list is inclusive of all the transactions before 2:15 and exclusive of all transactions after the market reopened at 2:15.

Since the settlement of Bhadra 28 (Sept. 13), Sunday is supposed to happen today by the standard procedure, we also asked about it. Neupane says he can't say with certainty whether it will happen today itself. Nevertheless, CDSC will work on it next after the settlement of Bhadra 25 will be completed.

To know about how NEPSE filtered these 3,800 transactions and made a list, we tried calling NEPSE. NEPSE spokesperson cut our call directly. We then called Chandra Singh Saud, NEPSE Director/ CEO. Saud picked up our call and said he was busy. Thus, nobody from NEPSE could give us their take on the issue.

Meanwhile, we called Mr. Bharat Ranabhat, President of Stock Brokers Association of Nepal. He has some valuable insights on the issue.

Basically, Ranabhat says that the transaction nullification wasn't a great deal for sellers. They simply had sold their shares multiple times because of the TMS issue. So, the multiple trades being canceled seems logical to them.

However, Ranabhat says that the decision to nullify is a major blow to the rights of buyers. Buyers do not care about the TMS issue. They do not care who sold the shares so that they could buy them. All they know is that they had bought the quantity of stock they liked, at a price they thought was reasonable to them. And out of nowhere, NEPSE uses its autocratic power to nullify the transactions.

In short, buyers in NEPSE can't be assured that they have bought their shares even if they click the buy button and the transaction is complete. This does not happen in any other securities market of the world, Ranabhat says.

Ranabhat also suggests that a stock exchange is morally and legally obligated to provide the allotted quantity of shares after a buyer completes his transaction. When issues like this arrive, he says NEPSE should be able to provide a buyer their shares by auction process if required. According to Ranabhat, this event only strengthened his belief that procedural auction of shares should be of NEPSE's interest in the days to come.

We also asked him about NEPSE's responsiveness at times like these. Even broker companies are left in the dark when issues are seen in NEPSE. Ranabhat was sympathetic about this matter in the sense that NEPSE's main focus at times like these is to first get the problem solved.

How do you feel about this recent issue in Nepal's only stock market? The comment section is for you.