As of September 6, the CDS and Clearing Ltd (CDSC)—a subsidiary company of Nepal Stock Exchange Limited (NEPSE) that provides centralized depository, clearing, and settlement services—has 3,361,171 users registered on its ‘MeroShare’ website. This means that if there is an Initial Public Offering from a company, 3.3 million users can apply for it online, without having to visit the issuing capitals.

Similarly, NEPSE informs that as of this week, there are 923,000 users registered in its Trading Management System (TMS). So on any given Sunday, all of the 923,000 users could log in to the TMS website, causing a crash. The crashing of both TMS and MeroShare, due to high user volumes, has happened before and many users have complained of ensuing losses.

Online securities trading in Nepal for both primary and secondary markets has come a long way since its beginning on 6 November 2018. The introduction of an online IPO application system reduced the need of lining up for hours in capital offices to manually fill the forms. And TMS gave the users the luxury of buying and selling stocks as well as making and receiving payments from their homes without having to visit broker offices and banks.

“Anyone who says online trading has not helped them is out of their mind,” veteran investor Nirmal Pradhan tells ApEx. Pradhan believes online trading has roped in many new investors to the market which has, in turn, contributed to high trading volumes.

Prayas Dulal, a business analyst who recently completed his first year in the market as a trader, differs. Having looked at many online videos, resources, and tutorials for trading, Dulal finds both TMS and MeroShare very basic, primitive even. “On days of IPO opening or allotment, we can’t even log in to MeroShare,” Dulal complains. “I used to panic when I had sold shares but could not complete my Electronic Delivery Instruction Slip (EDIS) on time to avoid close-out penalties.”

As a long-time investor and an active trader, Manil Shrestha’s views on the online trading system are closer to Pradhan’s. Having closely watched the market since 2003, Shrestha feels that securities trading in Nepal has progressed by “leaps and bounds.” Before TMS, traders had to depend on brokers for buying and selling stocks by either going to the office physically or through phone calls and text messages. Any lapse in communication would lead to losses and there were many human errors.

“Now with the online system, you can grab immediate opportunities and not let anything break your momentum,” Shrestha says. About the momentary failures of both TMS and MeroShare.

Shrestha does acknowledge the problems and agrees there is room for improvement. “Heavy traffic in both MeroShare and TMS causes the system to jam. This can be improved by increasing their bandwidths,” Shrestha says. “But again, these high-volume trades that crash TMS happen like 15-20 times a year. So how feasible is it going to be for NEPSE to maintain heavy bandwidths all year long?”

SEBON, the government-established regulator of the securities market, is aware that the current system is not tailored to handle a high number of users. “We have asked both NEPSE and CDSC to audit their systems and upgrade their capacities,” Ajay Dhungana, Assistant Director for Research at SEBON, informs. “We cannot build systems that cover the country’s entire population and have to upgrade based on best estimates of potential growth in the number of users.” Dhungana suspects that the various anomalies and glitches seen in the system might have been caused by unexpected growth of online users during the Covid-19 pandemic and lockdowns.

“We have made some major upgrades in the past two to three months and have sorted 80 percent of our issues,” informs Kanchan Sapkota, Head of Operations at CDSC, the NEPSE subsidiary responsible for managing MeroShare. “Further, we are planning a huge upgrade of our system this year to cover the high number of users registered with us and make the system even more advanced.” Despite these upgrades, glitches cannot be completely removed, Sapkota adds. As for the issues related to EDIS, MeroShare is not solely at fault, Sapkota explains. “There are different parties involved in MeroShare including the users themselves, NEPSE, and the brokers. Failure on the part of any one of them to act properly can cause a problem in the system,” Sapkota says.

Speaking on behalf of NEPSE, Murahari Parajuli, the company secretary and information officer, adds that the exchange is also working on upgrading the system. NEPSE is trying to have the brokers build and operate the TMS to shed its load. The brokers can choose from the different available modalities of TMS operation but within the requirements set by NEPSE. “We have already changed some bylaws to allow this and are waiting for SEBON’s approval for the project to go ahead,” Parajuli informs.

He further explains that although NEPSE is often blamed whenever there is a problem in the system, there is more to the story than meets the eye. TMS is a platform that NEPSE operates but the associated brokers are responsible for maintaining their individual servers. “Most brokers make thousands of clients and take commissions from them but do not increase their server capacities or improve their data center,” Parajuli says. “So in the end, everyone ends up blaming NEPSE for any shortcomings in the system.”