The 18th largest country in the world in terms of area at 1,648,195 km, Iran has a population of over 75 million. It is a country of particular geostrategic significance owing to its location in the Middle East & central Eurasia. Iran is bordered on the on the south by the Persian Gulf and the Gulf of Oman, and also is a littoral state of the Caspian Sea, which is an inland sea on the north. Tehran is the capital, the country's largest city and the political, cultural, commercial and industrial center of the nation. Iran is a regional power, and holds an important position in international energy security and world economy as a result of its large reserves of petroleum and natural gas. Iran is the second largest country in the world in terms of natural oil & gas reserves, and also is the second largest oil exporter.
The Gross Domestic Product (GDP) in Iran was worth 425.33 billion US dollars in 2014. The GDP value of Iran represents 0.69 percent of the world economy. GDP in Iran averaged 154.94 USD Billion from 1965 until 2014, reaching an all time high of 592.04 USD Billion in 2011 and a record low of 6.15 USD Billion in 1965. The biggest sector of Iran´s economy is services, which account for 51 percent of GDP. With services the most important segments are: real estate and specialized and professional services (14 percent of total GDP); trade restaurants and hotels (12 percent) and public services (10 percent). Oil production constitutes 23 percent of the wealth. Manufacturing and mining contribute for 13 percent of the output and agriculture for 10 percent. The last big component of the GDP is construction and electricity, gas and water distribution, which account for 7 percent of total output.
The January 2016 lifting of the nuclear-related sanctions provided a boost to Iran’s economy. Due to the lifting of the sanctions and a more business-oriented environment, the macroeconomic condition of the country is going to be in more vibrant situations. The state is planning for more protection of investors as well as listed companies. Lifting of sanctions will also broaden Iranian financing opportunities as the current low P/E ratio seems to make the market attractive to many foreign investors. The Securities and Exchange Organization (SEO) as the supervisory and regulatory body of the Iranian capital market is planning for developments.
Securities and Exchange High Council:
According to the new Securities Market Act of 2005, two supervisory bodies of capital market are Securities and Exchange High Council and Securities and Exchange Organization. High council is the highest authority in the capital market, establishing policies and market strategies for managing and expanding the markets. The council also oversees the implementation of laws and plicies , while giving directions to the capital market.
The general purpose of the Securities and Exchange Organization (SEO) is to provide a safe environment for investing in securities through supervising the participants’ activities in that market and to ensure that efficiency; fairness and order govern securities markets. The results of such supervision facilitate capital establishment and subsequently, improve macro-economic variables. This aim is fulfilled through supervising best practice of Securities Market Act of the Islamic Republic of Iran, passed in 2005 and in order to realize those aims, a series of by-laws and implementation instructions have been developed, approved and duly notified.
TSE opened in February 1967, during its first year of activity, only six companies were listed in TSE. Then Government bonds and certain State-baked certificate were traded in the market. The Tehran Stock Exchange has come a long way. Today TSE has evolved into an exciting and growing marketplace where individual and institutional investor trade securities of over 420 companies.
Iran Fara Bourse operates in Capital Markets in both listed and unlisted securities. There are two main markets for listed securities and one market for Structured Financial Products such as Sukuk, CDs, Mortgage Rights, ETFs, ETCFs, VC Funds, Mortgage Backed Securities (MBS), Islamic Treasury Bills. However, in unlisted securities or OTC operations, IFB holds Auction and Negotiation based deals. Additionally IFB owns a market for Privatization of Government linked Companies (GLCs), holds Mergers and Acquisitions as well as Intellectual Property listing which make an emerging yet active and innovative exchange.
Iran Fara Bourse has established set of prospective strategic plans in order to expand operations in new horizons. Launching Small & Medium Enterprise platform is one of the IFB priorities; facilitating SME Financing is for the purpose of boosting the Economic Development of the Country. Constitution of Venture Capital Fund in Iran Capital Markets would be major contribution in building Sustainable Economic Growth. Alongside the Macroeconomic policies, development of various types of funds in Capital Markets and different indexes development would assis implementing diversification strategies of market efficiency policies. Enhancement of Islamic Finance sector such as promoting and developing Sukuk and Shariah Compliance financial products will increase the efficient and effective accomplishment of successful Fiscal Policies.
Iran Mercantile Exchange was established on September 20, 2007 in accordance with article 95 of the new law of the Securities Market of the Islamic Republic of Iran and following the merger of the agricultural and metal exchanges of Tehran. The merger marked a new chapter in Iran capital market providing endless trading opportunities for the clients in and out of the country.
Services to the Market
Various sectors of economy and national industry benefit from the exchange operation. The scope of the services is as under:
- Performing as the first market providing access to the initial offering of the listed commodities
- Price discovery and price making for the OTC, secondary markets and the end users
- Providing venue for government sales and procurement purchases
- Providing Trading platform and user interface
- Providing Clearing & Settlement services
- Risk management
- Technology services
- Training and education of the market participants
Founded in 2005 as a public joint stock company, Central Securities Depository of Iran (CSDI) is the sole registry entity and custodian in the Iranian capital market using the hybrid registry system with a fully dematerialized book entry system. Enjoying a history of 45 years, the Iranian capital market was demutualized in 2005 and as a result, CSDI was legally segregated from the rest of the capital market and commenced to work as an independent and separate entity. It is the central registrar and clearing house for all the exchanges in Iran including Tehran Stock Exchange (TSE), Iran Farabourse (IFB), Iran Mercantile Exchange (IME), and Iran Energy Exchange (IEE). It takes over the registry, clearing, and settlement issues related to equity, Islamic securities (Sukuk), derivatives, energy contracts, electricity, mercantile products by means of a full-fashioned registry system and multi-currency (USD, IRR, Euro) with a high netting efficiency of 85 percent. The prospects of CSDI are to prepare the infrastructures indispensible for the efficiency, continuity, and growth of the economy of the markets under its cover. CSDI provides thriving and secured financial investment infrastructures in the capital market and safekeeping investors' financial properties.
Responsible for taking care of post-trade-related tasks, ranging from the deposit and registration of securities to the clearing and settlement of the transactions carried out in the financial market, it plays a significant role in managing systemic risk. To this purpose, CSDI has designed and launched the service of Settlement Guarantee Fund (SGF), along with other measures, towards managing the risk related to the clearing house.
Information Dissemination and Services Company as a privately-held company owned by SEO was established in 2004 to fulfill the task of capital market news broadcasting and providing educational programs for market participants. Today the most important functions of SIDS are as follows:
· Implement mechanism to best broadcast market-related news;
· Execute educational programs to familiarize the society with the capital market;
· Publish educational materials in terms of books and multimedia;
· Hold examination for professional licenses of the capital market; and
· Set up capital market exhibitions, Seminars and conferences.
SEO oversees all market segments according to the Act but has always taken pertinent steps to grant authority to subsidiaries and other market participants. To organize and supervise all financial entities in the capital market, article 53 of the Act stipulates establishment of active financial associations. Securities and Exchange Brokers Association of Iran (SEBA) and The Iranian Institutional Investors Association (IIIA) are the two main associations in Iran capital market whose existence like every other industry is essential for the ongoing progress of financial subsidiaries. These two associations are adequately represented in capital market bodies to ensure members' rights and interest to be continually fulfilled.