During the initial quarter of the current fiscal year, Nepal’s stock market saw a notable increase in over-the-counter (OTC) trading activity, registering a turnover of Rs. 1.71 Arba. What sets this OTC market apart is that a significant portion of these traded shares, approximately 36,721,120, belonged to companies not listed on the Nepal Stock Exchange (NEPSE) or had been previously delisted.
The OTC market, also known as the off-board market, operates outside the regular trading hours of NEPSE and offers a platform for the trading of shares of companies that are not listed on NEPSE or have been delisted. Typically, OTC trading takes place from 11 AM to 1 PM on NEPSE, excluding public holidays and Fridays.
To establish a structured framework for the OTC market, NEPSE introduced the ‘OTC Market Regulations, 2065’ in Jestha, 2065. This laid the groundwork for a distinct trading counter, separate from regular automated trading.
Engaging in the OTC market entails investors directly submitting their buy and sell orders to the market, which NEPSE registers in sequential order. Buyers in the OTC market are required to provide company-specific purchase orders and deposit 10% of the share amount as collateral. This information, which includes the company’s name, investor details, and pricing, is displayed on the price quoting board. Subsequently, the market adjusts trading based on the received orders and price information, with transactions taking place when prices and quantities align.
Regarding the clearance process, sellers must present the share certificates to the designated branch for verification within three business days. On the other hand, buyers are obligated to deposit the payment within the same duration at the bank specified by NEPSE. This process ensures the orderly execution of OTC transactions.