CDS system in 259 days

Establishing Central Depository System (CDS) for clearance and settlement of share trading has come one step closer after the Nepal Stock Exchange (NEPSE) and Central Depository and Services (India) Limited (CDSL) signed an agreement on technical cooperation on Friday. As per the plan of action set by NEPSE, the CDS System will come into operation within 260 days of the signing of agreement between the two sides. The CDSL will be providing technical assistance for the establishment of the system in

the areas of legal, software, establishment of settlement fund among others as per the agreement.

Indian government will be providing grant assistance of IRs 92 million for software installation and consultancy and training. NEPSE general manager Shankar Man Singh said that the system would be established within the set timeframe if any untoward incident didn't happen to block the ongoing process.  "We have finalized the regulation more or less for the system which is the most difficult part of the process," Singh said. According to him, Indian experts who have come from CDSL are reviewing the legal documents currently. "They are also holding discussion with the Securities Board of Nepal (SEBON) on Sunday." The SEBON will be the regulatory body of the new CDS system too.

A team of four experts including executive director of CDSL P.S Reddy who is an expert on clearance and settlement as well as other three experts on legal, software and new projects are in review and consultation with SEBON and NEPSE officials. They are scheduled to stay here for a week, according to NEPSE. As per the NEPSE plan of action, regulation must be finalised at the earliest and required hardware including computers should be managed within the next three months.

The CDS Company should be registered within the fourth months of the singing of agreement. "We have already finalised the article of association and memorandum of association for the company," Singh said. The NEPSE will have the biggest stake in the new company as well as some commercial banks and Citizen Investment Trust (CIT) will be partner shareholders. 

Singh said that NEPSE would have to sign separate agreement even with a software company, CNC, which is also the software supplier to CDSL. "A separate agreement with CNC is necessary to ensure its service during the operation of CDS system," Singh said.

Singh said that a user acceptance test should be conducted to ensure that the users of this system will be able to use it without hindrance and some other prerequisites should be fulfilled to establish the company finally."With the establishment of the CDS system, it will end the existing delay in clearance and settlement process due to manual procedure and double transaction within the six months of the establishment of system," Singh said. It takes around two week for clearance and settlement of shares currently.

Source: ekantipur