Unresolved controversy whether to keep NEPSE open or shut; Good reasons to pull down the shutters in NEPSE for time being

Was it necessary to close the market again? - Yes; Out of fear of it going down? - No

I personally felt that NEPSE should have opened only after the end of lockdown but it was opened and had to be closed again after only 2 days of trading. No one knows why it was opened and closed again but the decision to close the market until Jestha 20 needs to be welcomed. Let us hope that the situation will be under control and lockdown will be lifted after Jestha 20 and then market will be opened and run as per its usual operating procedures (trading hours, circuit breakers, etc), as we have seen how opening the market in a hurry with new set of rules fared and market had to be closed again only after 2 days of operation.

I do not agree to the claims made that NEPSE must be closed because it will go down because the market must be left free to decide its own course by operating it in a fair and orderly manner. Also, there is no need to panic about the downfall as there are more reasons of it going upwards than downwards when operated in a fair and orderly manner.

Following are few simple reasons why the market needs to be closed until lockdown:

1. The whole country is in lockdown so the proper representation of the investors is not possible. Thus, the market cannot operate freely and pave its way by itself.
2. We have not yet developed proper infrastructures to carry out the entire clearing and settlement process electronically.
3. Investment in software and data security in Nepal is very minimal so that we come across incidents of SWIFT and ATM hacks/frauds time and again. So, it becomes difficult to develop trust towards online/internet banking.
4. It is mandatory to go to the bank once to activate connectIPS. There is also a transaction limit in fund transfer through connectIPS.
5. The NEPSE Online Trading System (NOTS) has not been able to attract investors because of various reasons. It needs a lot of improvements to attract investors.

Times like these are unprecedented times, thus we got to see few unprecedented decisions/acts such as:

1. For the first time in the history, The New York Stock Exchange (NYSE) closed its physical trading floors from March 23, this was the first time that the physical trading floor was closed and only electronic trading remained open. (It is in process of opening the physical trading from May 26).
2. Various countries issued ban in short selling.
3. National Stock Exchange India Ltd. (NSE) allowed the brokers to relocate their trading terminals to home or locations other than those that were previously authorized.
4. ZEE BUSINESS, the No. 1 business channel of India, started a campaign demanding the closure of market, which was appreciated by market experts also.
5. Association of National Exchanges of Members of India (ANMI) which represents 900 members wrote a letter requesting Securities and Exchange Board of India (SEBI) to close the market till the lockdown period.

Despite such demands from most of the stakeholders the market was not closed in India because they have the infrastructure to carry out transactions digitally and the main reason was the strong presence of FIIs (Foreign Institutional Investors) in the market.

Now as the market is closed we should utilize this time and think positive, spend quality time with family, gain knowledge (financial as well as other), make future strategies and plans about life and also finance. As they say ‘Necessity is the mother of invention’, let us hope that this closure of market will serve as a lesson and reforms will be made and the full fledged online trading would be possible in NEPSE in near future.

You can read about the reasons of NEPSE going upwards than downwards in my previous article here:: Nepal Stock Exchange opening its trading from today, In which direction will NEPSE index move now?

Rojin Joshi, An avid and optimistic investor