SEBON Proposes Phased Introduction of Intraday Trading in Nepal’s Stock Market

Nepal’s securities market regulator, the Securities Board of Nepal (SEBON), has moved forward with plans to introduce intraday trading in Nepal as part of broader reforms aimed at improving market liquidity, strengthening price discovery and developing modern capital-market infrastructure.

The proposed framework places investor protection and risk management at the center of implementation. Rather than introducing intraday trading across the entire market immediately, SEBON has proposed a phased approach, beginning with a limited number of highly liquid securities.

Under the proposed initial model, investors would be allowed to buy securities first and sell them later on the same trading day, commonly described as the “Buy First, Sell Later” model.

SEBON has already identified intraday trading as part of its wider secondary-market reform program. Its implementation committee is working on the legal, technical, operational and procedural preparations required for margin lending, intraday trading, securities lending and borrowing, and short selling.

What Is Intraday Trading?

Intraday trading refers to buying and selling securities within the same trading day. Unlike conventional investing, where an investor may hold shares for days, months or years, an intraday trader seeks to open and close a position during a single market session.

For example, an investor could buy an eligible NEPSE-listed stock in the morning and sell the same stock later that day if the market price moves according to the trader’s strategy.

However, successful intraday trading requires much more than simply buying and selling quickly. It requires adequate liquidity, fast order execution, real-time risk controls, sufficient securities and funds, broker-level risk management and effective market surveillance. Recent discussions among Nepali market stakeholders have highlighted these infrastructure and regulatory requirements.

SEBON’s Proposed Phased Approach

SEBON’s broader secondary-market reform plan envisages introducing new trading and financing facilities gradually rather than implementing everything simultaneously.

The regulator has indicated a sequence involving:

1. Margin Lending
2. Intraday Trading
3. Securities Lending and Borrowing
4. Covered Short Selling

The implementation committee established by SEBON includes representatives from SEBON, Nepal Stock Exchange (NEPSE), CDS and Clearing Limited (CDSC), and the Stock Broker Association of Nepal. Its responsibilities include recommending legal, technical, operational and procedural arrangements and preparing the necessary infrastructure for phased implementation.

Buy First, Sell Later: How Could the Initial Model Work?

The proposed Buy First, Sell Later approach is designed as a relatively controlled starting point for intraday trading.

Under this model, an investor would first purchase an eligible security. The investor could then sell that position later during the same trading session, subject to the applicable rules, trading limits and risk-management requirements.

Initially restricting intraday trading to securities with sufficient liquidity could help regulators and market participants evaluate the system before expanding it to a wider range of stocks.

The exact list of eligible securities, trading limits, settlement arrangements, margin requirements, risk controls and other operational conditions would depend on the final regulatory framework.

Why Is Intraday Trading Being Considered?

The proposed introduction of intraday trading is linked to several objectives for Nepal’s capital market.

1. Improving Market Liquidity

Intraday trading can create additional trading activity in eligible securities. Higher participation may increase the frequency of transactions and improve the ability of buyers and sellers to transact.

2. Strengthening Price Discovery

More active trading can contribute to the process through which market participants determine the price of securities.

3. Modernizing NEPSE Infrastructure

Intraday trading requires faster and more integrated trading, clearing, settlement and risk-management systems.

4. Expanding Trading Opportunities

A formal intraday framework would provide market participants with a structured mechanism for opening and closing positions within the same trading session.

5. Supporting Broader Capital-Market Reform

Intraday trading is being considered alongside other reforms, including margin lending, securities lending and borrowing, and covered short selling. SEBON's consultation materials list these reforms as part of the broader modernization of Nepal's securities market.

Infrastructure Will Be Critical

Introducing intraday trading is not simply a matter of changing trading rules.

The market infrastructure must be capable of processing transactions and managing risk in real time. This includes NEPSE's trading infrastructure, CDSC's settlement and clearing systems, broker technology and automated risk-management mechanisms.

Market stakeholders have specifically pointed to the need for real-time position adjustments, automated risk controls and systems capable of handling the additional transaction volume associated with intraday trading.

Investor Protection and Risk Management

Intraday trading can provide additional trading flexibility, but it also introduces risks that investors need to understand.

Fast price movements can result in rapid gains or losses. Trading costs, liquidity, bid-ask spreads, execution speed and disciplined risk management can also materially affect trading outcomes.

For this reason, SEBON's proposed phased implementation places emphasis on investor protection, eligible securities and adequate infrastructure rather than immediately opening intraday trading across the entire market.

Investors should also distinguish between intraday trading and long-term investing. The strategies, risk-management techniques and analytical requirements can be substantially different.

What Could This Mean for NEPSE Investors?

If the proposed framework is eventually implemented, intraday trading could introduce a new dimension to Nepal's secondary market.

Traders may increasingly need to understand:

• Intraday price action
• Support and resistance
• Volume and liquidity
• Market depth
• Technical indicators
• Risk-reward ratios
• Stop-loss strategies
• Position sizing
• Trading costs
• Real-time market information
• Broker trading systems
• Market-wide and stock-specific volatility

This could also increase demand for structured stock market education in Nepal, particularly for investors who want to understand technical analysis and short-term trading before participating in intraday transactions.

Intraday Trading Is Not the Same as Easy Trading

The introduction of intraday trading should not automatically be interpreted as an opportunity for guaranteed short-term profits.

Trading within a single day requires disciplined execution and risk management. Investors who participate without understanding market volatility, order execution and position sizing could face significant losses.

Therefore, stock market education, technical analysis training and practical understanding of NEPSE market behavior could become increasingly important if intraday trading is introduced.

What Happens Next?

SEBON's current reform process indicates that intraday trading is being developed through a phased regulatory and infrastructure process rather than as an immediate market-wide facility.

The regulator's consultation materials show that Nepal is working on several components of secondary-market modernization, including margin lending and the broader framework for margin lending, securities lending and borrowing and short selling.

The final rules will determine important details such as eligible securities, trading limits, risk-management mechanisms, settlement procedures, broker responsibilities and investor safeguards.

Until the final framework is approved and operational, investors should treat the current proposal as a regulatory development rather than an already-available trading facility.

Conclusion

The proposed introduction of intraday trading in Nepal represents an important development in the modernization of the country's securities market.

SEBON's phased approach—starting with liquid securities and a Buy First, Sell Later model—indicates an effort to develop the facility while giving priority to infrastructure, risk management and investor protection.

The success of intraday trading will ultimately depend not only on regulatory approval but also on the readiness of NEPSE, CDSC, brokers, technology systems and investors.

For investors, the potential arrival of NEPSE intraday trading makes understanding technical analysis, risk management, market liquidity and trading discipline increasingly relevant.

For those looking to build a stronger foundation, Sarbaguna provides resources related to stock market training in Nepal, NEPSE analysis, technical analysis and practical share-market education.

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