Kathmandu: Nepal is already talking about derivatives, short selling, options and Global Depository Receipts. But the irony is hard to ignore: even basic reforms like After Market Order and intraday trading, which have been discussed for a long time, are still not available to ordinary investors in a practical and regular way.

That is why the capital market reform announcement in the latest budget deserves both appreciation and caution.

Budget Pushes Nepal Toward Capital Market Modernisation

The latest budget has announced the restructuring of the Nepal Stock Exchange and the phased introduction of intraday trading, short selling and derivative instruments. It has also opened the door for listed Nepali companies to issue Global Depository Receipts and access foreign securities markets.

On paper, these are major reforms. They show that the government wants Nepal’s capital market to move beyond ordinary share buying and selling.

But the real question is not whether these ideas sound modern. The real question is whether Nepal’s market is ready to implement them in the right order.

The Unfinished Basics: AMO and Intraday Trading

This is where the concern begins.

Intraday trading has been discussed for some time, but it has not reached investors in actual market practice. After Market Order, commonly known as AMO, would allow investors to place orders outside regular trading hours. For many retail investors who cannot continuously monitor the market between 11 AM and 3 PM, AMO would be a useful and practical reform.

Yet even AMO has not become a regular and accessible market feature for general investors.

So when the market hears about derivatives, options and GDRs, the question naturally arises: if Nepal has not fully delivered AMO and intraday trading, can it realistically move toward far more complex instruments?

Why Derivatives Are Not Just Another Trading Feature

Derivatives are not simple trading tools. Globally, they are used for hedging, risk management, price discovery and portfolio strategy. But they also require strong systems.

An options market, for example, is highly technical. It requires pricing models, margin systems, clearing arrangements, liquidity providers, investor education and real-time regulatory surveillance. Without these foundations, derivatives can do more harm than good.

In a market where many retail investors still make decisions based on rumours, social media tips and short-term price movements, complex products may increase speculation instead of improving market depth.

Market Participants Are Also Cautious

This concern is not only theoretical.

Speaking to Sajha Artha, Bhaktiram Ghimire of Imperial Securities expressed doubt over the immediate practicality of derivatives in Nepal. His view was clear: the market would benefit more if reforms like AMO and intraday trading were implemented first.

According to him, if AMO and intraday trading can be made available and function properly, that itself would be a meaningful achievement for Nepal’s capital market at this stage.

That argument deserves attention.

Capital market reform is not only about announcing sophisticated instruments. It is about building the systems that can support them.

Intraday Trading Itself Would Be a Major Step

Intraday trading would allow investors to buy and sell the same security within a single trading day. For active traders, it would provide flexibility. For the market, it could improve liquidity.

But even intraday trading requires stronger technology, broker-level risk controls, proper margin rules and clear limits to prevent excessive speculation.

In other words, intraday trading may sound simple compared to derivatives, but it is still a serious market reform. If Nepal can implement it properly, it would build confidence for the next phase of capital market development.

Short Selling Needs a Strong Borrowing System

Short selling also needs caution.

In developed markets, short selling helps price discovery by allowing investors to take a negative view on overvalued securities. But it cannot function properly without a securities lending and borrowing mechanism.

Without strong rules, short selling can create fear, rumours and market manipulation. For Nepal, this means short selling should not be introduced only as a budget headline. It should come with clear rules, investor protection and strict surveillance.

GDR Can Open Global Capital, But Not for Every Company

The same principle applies to Global Depository Receipts.

Allowing Nepali listed companies to issue GDRs and access foreign securities markets is a bold idea. It could help strong domestic companies raise international capital and improve their global visibility.

But GDRs are not suitable for every listed company.

Foreign investors will not invest simply because a company is listed in Nepal. They will look for governance, transparency, financial reporting standards, liquidity, growth prospects and regulatory clarity. Companies with weak disclosure and poor governance will not automatically become attractive just because a foreign listing route is available.

For GDRs to work, Nepal will need clear legal procedures, tax clarity, foreign exchange rules, repatriation mechanisms, custodian arrangements and coordination between domestic regulators and foreign exchanges.

Without these foundations, GDR may remain more of a policy headline than a usable capital-raising tool.

Nepal Must Get the Reform Sequence Right

This is why sequencing matters.

The first priority should be NEPSE restructuring with a clear ownership, governance and technology roadmap. The second should be stronger regulatory surveillance and enforcement. The third should be improvement in clearing, settlement, broker risk management and investor grievance systems.

After that, Nepal should make AMO and intraday trading available in a controlled and reliable manner.

Only after these reforms are tested should Nepal move toward short selling, derivatives and options.

Ambition Is Right, But the Foundation Must Be Strong

The budget has shown ambition, and that ambition should not be dismissed. Nepal’s capital market cannot remain limited to ordinary equity trading forever. Investors need better tools, companies need access to larger capital, and the market needs more depth and liquidity.

But modernization should not mean skipping steps.

The danger is not that Nepal is dreaming too big. The danger is that it may try to introduce advanced products before proving that the basic systems work.

If Nepal builds the foundation properly, derivatives, short selling, options and GDRs can eventually become part of the next stage of capital market development. But if these reforms are rushed, they may create more confusion than confidence.

For now, AMO and intraday trading should be treated as the credibility test of Nepal’s market reform. If the market can implement these basic reforms properly, the discussion on derivatives and GDRs will become more credible. If not, the advanced reform agenda will remain ahead of market reality.

The conclusion is simple: Nepal’s capital market vision is not too high, but the market must first prove that it can deliver the basics.