Kathmandu: The conversation surrounding intraday trading and short-selling has once again taken centre stage in the Nepali securities market. This resurgence follows the announcement by Finance Minister Dr Swarnim Wagle in the budget for the upcoming fiscal year 2026/27, pledging a phased introduction of these financial instruments. While the announcement has sparked optimism, it has also reignited a long-standing debate regarding the wide chasm between policy declarations and their practical execution.
In Nepal’s financial landscape, there is a recurring trend of announcing sophisticated market tools without first establishing the necessary foundation. History shows that it often takes years, or even decades, for such provisions to move from paper to practice. For any new instrument to function effectively, the market requires robust infrastructure, a mature investor base, and a stable regulatory environment. Without these prerequisites, new policies frequently languish in a state of perpetual limbo.
The track record of past initiatives serves as a cautionary tale. Margin trading, for instance, finally entered the implementation phase after more than a decade of discussion, yet it remains largely ineffective today. Despite a few companies offering the service, investor interest has been tepid. Similarly, the framework for issuing and trading securities for Small and Medium Enterprises (SMEs) faced years of delays. Although the Securities Board of Nepal (SEBON) implemented the SME Securities Issuance and Trading Regulations in early 2025, the system remains stalled because the Nepal Stock Exchange (NEPSE) has yet to finalize the necessary bylaws, and stakeholders have shown little urgency in pushing it forward.
The successful rollout of the Finance Minister’s proposed intraday and short-selling tools depends heavily on the current state of capital market infrastructure and legal readiness. Experts argue that these are far more complex than traditional “buy low, sell high” equity trading. Effective intraday trading relies heavily on technical analysis and requires a suite of supporting mechanisms, including Margin Intraday and Square-off (MIS) facilities, stock lending, and borrowing systems. Without these fundamental pillars, the implementation of such high-risk financial instruments remains a daunting challenge.
To make intraday trading viable, a mechanism for “short selling”—selling shares one does not currently own—and “Stock Lending and Borrowing” must be established. Under such a system, investors can utilize leverage, allowing them to execute trades significantly larger than their actual deposit. For example, a margin of five thousand rupees could potentially allow a trader to move one hundred thousand rupees worth of shares. However, this system dictates that all positions must be “squared off” or settled before the market closes for the day.
Market analysts remain sceptical, labelling these budget promises as “hollow rhetoric” given the current structural limitations. They note that previous finance ministers have made similar ambitious claims that never materialized. The concern is that neither the current technology nor the general investor community is prepared to handle the volatility and complexity associated with such high-stakes trading. While SEBON has included these tools in its annual policies for years, they have rarely moved beyond the “study and research” phase.
In simple terms, intraday trading allows for the buying and selling of a stock within the same business day. If a trader anticipates price fluctuations in a particular bank’s stock, they can buy and sell multiple times to capitalize on small movements or “average out” losses if the price drops. To facilitate this, the trading system must allow users to specifically select “intraday” at the time of purchase. Internationally, the tax implications for such rapid trades are often higher than for standard long-term investments, and profits are calculated on a cumulative basis over specific periods.
Short selling, a vital component of this ecosystem, involves selling securities that the seller does not own, usually in anticipation of a price decline. While some countries restrict this practice to prevent market manipulation, others allow it under strict oversight, ensuring that trades are backed by a lending mechanism to guarantee settlement. Currently, Nepali law is largely silent on the legality and procedural aspects of short selling, and the existing framework does not even envision a same-day settlement cycle, as the market still operates on a T+2 (transaction plus two days) basis.
Operating an intraday market requires specialized knowledge and sophisticated technical tools from investors, brokers, and market operators alike. It is not a suitable arena for inexperienced retail investors who lack an understanding of market risks or have limited financial resources. However, for full-time professional traders, such tools are essential for market depth. In developed economies, these systems have evolved over centuries, whereas in Nepal, the transition from a traditional mindset to a high-velocity trading environment remains a significant hurdle.
Despite the risks, the potential benefits of intraday trading are notable. It allows for high capital efficiency and provides an opportunity for traders to profit from small price movements without holding positions overnight, thus eliminating “gap risk.” Furthermore, it can significantly increase market liquidity and help curb extreme volatility. Often, brokerage commissions for intraday trades are lower than those for delivery-based trades, making it an attractive option for high-volume participants.
However, the downside is equally significant. The potential for loss is magnified by the size of the leveraged trades, and a few minutes of inattention can lead to substantial financial damage. Traders must remain glued to their screens, processing a constant stream of information and making split-second decisions. Because of this high-risk profile, many experts suggest that intraday trading should initially be restricted to institutional investors or highly experienced individuals who meet specific criteria, such as a minimum turnover of five million rupees and a proven track record of online trading.
A 2020 study by NEPSE highlighted that moving toward intraday trading involves managing both operational risks—such as technical glitches or human error—and market risks. Ensuring that NEPSE, the central depository (CDSC), and brokerage firms have the requisite technology and manpower is crucial. Additionally, the study emphasized the need for a separate agreement and account type for intraday traders, aligning Nepal with international best practices.
Ultimately, the success of these new instruments hinges on transparency and corporate governance. In an environment where information flow is often inconsistent, the risk of insider trading increases. Regulators must strengthen mechanisms to ensure that accurate information from listed companies reaches all stakeholders simultaneously. While intraday trading represents a modern leap for Nepal’s market, its realization requires more than just a budget speech; it demands a comprehensive overhaul of the technical, legal, and educational frameworks that define the Nepali financial landscape.
Comment Here