Transaction costs

Economies of scale or scope are achieved with increase in trade volume. The
increase in trade volume comes through attracting more investors, trading greater
variety of securities like stocks, bonds, derivatives, etc. which help to divide
transaction cost evenly among them. Thus transcation costs can be reduced with a
new stock exchange which will have greater variety of securities.
Transparency
In an attempt to attract greater pool of investors, the stock exchanges will be forced
to expose as much information about the listed companies as possible so that the
prices on these exchanges reflect the current market information as much as
possible. Without proper exposure of public information, investors will not be willing
to trade on either one of the exchanges and they might eventually loose listed
companies too. Thus transparency will be induced with increased competition.
Additionally, implementation of automation in trading in the exchange will make
variables like market depth, easily visible to investors and increase capacity of
matching orders.
Operational efficiency
Higher transparency in information in the market will lead the prices of securities to
reflect accurate market information. The trading will then shift from hunch and
instinct based trade to technical analysis based trade attracting more investors
attention and confidence. Also, improved technology will allow the stock exchange
to disseminate pricing information to more investors across the country and even
operate for greater number of hours than at present which will be another driving
factor for an increase in trade volumn in the stock market.
Higher product innovation and advanced technology
Increased competition among the two stock exchanges will force the exchanges to
invest in IT and technology, innovate and offer value added services to the
investors. As we will see later in the presentation, competition from stock
exchanges led many stock exchanges to undergo complete structural and
technological reforms to provide innovative and value added services to the issuers
as well as investors.
Nationwide access to capital market
With increase in automation of stock trading, the capital market will not only be
limited to few investors centralized in major cities like ktm, pokhara, birgunj,
biratnagar, etc. Investors from all over Nepal will be able to trade and invest. Not
only that, NRNs and other big institutional investors willing to invest in Nepalese
capital market will be able to invest easily through automation services.
Diversified instrunments of trade
In the present stock exchange, only company scrips are traded mostly. Development
bonds are virtually non existent while corporate bonds are very few in number. With

a new exchange, to capture greater market share it will start trading not only scrips
but various other instruments of trade.

Reduced listing fees: To attract greater number of companies in the exchanges, they
might engage in price competition to reduce listing fees. The fees at the moment
are monopolized by NEPSE and thus various companies are often found complaining
that the fees are too high. Second stock exchange will force NEPSE to drive down its
listing fees to beat the competitor.
Higher liquidity and marketability:
The market will have greater liquidity if the securities are available to the price
takers and the prices reflect the available market information about the security. A
new stock exchange will allow the prices to reflect all relevant information and
hence, investors will also be willing to invest in such securities. The marketability
will also increase since the full automation of the stock exchange will enable people
from all over Nepal as well as outside to invest in the securities. Such increased
liquidity and marketeablity of shares with enhanced communicaitons technology
and investors confidence is a definite plus point for the issuing companies as more
investors will be willing to invest in these companies now.

Diverse pool of investors: The present stock market deals mostly on stocks which
are risky forms of investment. So for risk averse and risk neutral investors, there
arent many lucrative investments in the capital market. With the introduction of
second stock market, various other market instruments like risk neutral government
bonds, municipal bonds, or risk averse mutual funds, etc. will get introduced due to
the advanced technology and ability of the stock exchange to handle diverse group
of securities.