Broker Blockade! Digital Share Transfer System Ready but Stalled as Brokers Raise Red Flags Over Financial Risks

Despite the rapid digitization of Nepal's capital market, the 'BO to BO' (Beneficiary Owner to Beneficiary Owner) transfer service remains stuck in a manual era. While CDSC (CDS and Clearing Limited) has already developed the software required to automate this process, the service has not been launched due to opposition from stockbrokers.

Currently, investors who own two demat accounts must physically visit their broker's office for a recommendation and then travel to the CDSC office in Putalisadak to complete a transfer. This process is time-consuming for investors and creates a heavy administrative burden for CDSC staff, who must process hundreds of physical applications daily on a same-day basis.

According to CDSC officials, the primary reason for the delay is the 'credit risk' raised by broker companies. Under the current T+2 settlement system, brokers fear that an investor could purchase shares on credit, immediately transfer them to a different demat account via the online system, and sell them through another broker before the original broker is paid. Brokers have pressured authorities to stall the system until these financial risks are addressed.

Beyond technical hurdles, CDSC's informal studies reveal that BO to BO transfers are often used for market manipulation. While genuine investors use it to switch to brokers with better service, large-scale 'market players' use it to hide their activities from the daily 'floor sheet.' By buying shares through one broker and transferring them to another before selling, these players can exit their positions without alerting retail investors who monitor specific broker movements. CDSC is currently in discussions with NEPSE and SEBON to implement 'filters'—such as blocking transfers of shares with outstanding dues—to ensure the system is secure before it goes live.