The Nepal Stock Exchange suspended trading twice in rapid succession on Monday morning as a post-election buying frenzy drove the benchmark index past two consecutive circuit breaker thresholds within the first hour of the session, a rare sequence that threw a spotlight on a market safeguard law that has sat untouched since 2007.
One minute after the opening bell, the NEPSE Index had already surged past the 4 percent mark. Under rules first introduced on September 21, 2007, that triggered an immediate 20-minute halt across all equities. When trading resumed at 11:21 AM, buyers came back just as aggressively. The index climbed past 5 percent shortly after, forcing a second suspension, this one 40 minutes long. The third and final threshold, a 6 percent move that would have shut the exchange for the entire day, was not breached. Monday could have been worse. It wasn’t, but it came close.
The Rules That Froze the Market Twice
Nepal’s circuit breaker framework operates on three levels, each escalating in severity. The first kicks in when the index moves 4 percent in either direction before 12:00 PM, halting all trading for 20 minutes. The same move after noon triggers nothing. The second threshold activates at 5 percent, but only between 12:00 PM and 1:00 PM, suspending the market for 40 minutes. In practice, this is almost always a second circuit; the market has already been paused once, resumed, and then kept running in the same direction.
The One Rule That Has No Off Switch
The third threshold is different in kind, not just degree. A 6 percent move in either direction at any point in the trading day, from the opening minute to the final seconds before the 3:00 PM close, immediately shuts the exchange for the rest of the session. No countdown. No resumption. The day is simply over. Unlike the 4 and 5 percent rules, which go quiet after 1:00 PM, the 6 percent rule imposes no time limit.
It is active from the moment the market opens until the final bell. After 1:00 PM, the 4 and 5 percent rules stand down, and the market trades freely, with that single permanent exception. These are also market-wide rules. Individual stocks have their own daily price bands, typically capped at plus or minus 10 percent, that run independently of index-level halts.
A Law Written in 2007 That Nobody Has Touched Since
The system traces its legal authority to the Securities Board of Nepal, which regulates the market under the Securities Act 2063. The day-to-day operation of the circuit breakers is delegated to NEPSE under Rule 19 of the Securities Listing and Trading Regulation, 2075. A separate provision, Rule 21(1), grants
NEPSE authority to suspend trading entirely when outside circumstances threaten stability, whether civil unrest, curfews, or pandemics. That clause was used as recently as September 2025, when widespread unrest across the Kathmandu Valley forced a multi-day closure.
Investors Have Complained. Nothing Has Changed.
Despite years of pressure from investors, some have long argued for an asymmetric model that gives the market more room to rise before halting while keeping the downside threshold tighter; neither SEBON nor NEPSE has touched the rules. The thresholds remain exactly as they were set nearly two decades ago.
How Close Monday Really Got
Monday was a reminder of how fast things can move. The 6 percent threshold that would have ended the trading day on the spot sat just one percentage point above where the index finally topped out. For a market driven heavily by retail investors, a 20-minute pause is sometimes all that stands between an orderly session and a stampede. That, regulators have always argued, is the whole idea.
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