Tehran Stock Exchange Launching Equity Futures on Sunday

EghtesadOnline: Future contracts (also known as futures) will be launched officially on the Tehran Stock Exchange TSE on Sunday, the TSE director said.

News ID: ۷۴۶۱۳۶

15 December 2018

Ali Sahraee said such futures are traded internationally in the form of ‘Index Futures’ but since "physical delivery" is not possible in such contracts, they have been adjusted to comply with Islamic jurisprudence.

He said the futures will be launched under supervision of Jurisprudence Committee of the Security and Exchange Organization, which granted the necessary permission for the futures.

Index futures are futures contracts on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract. Futures themselves are financial contracts obliging the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price. The asset can be anything such as a physical commodity or a financial instrument, Financial Tribune reported.

Islamic futures, however, are designed in a way as to guarantee delivery and payment. In fact, physical delivery of goods distinguishes Islamic futures from their non-religious counterparts.  Islamic tenets reject risk and speculation in the deals and the goods need to be valuable and real.

"However the composition, index changes, index return, and portfolio of assets are all the same as the original Index Futures “, Sahraee was quoted as saying by the Security and Exchange News Agency (SENA)

Shapour Muhammdi, the SEO chief executive, announced earlier in the week that futures will be offered on shares of 30 leading companies.

Iran Mercantile Exchange has already launched gold coin and saffron futures and is mulling a currency futures.

Competitive Advantage

According to the TSE website, the futures benefit from a standard future contract such as leveraging features , possibility of making profit from positive and negative fluctuation of base prices, price transparency, guaranteeing trade by TSE clearing house and adding variety to asset portfolios.

Sahraee referred to the significant role of derivative tools in hedging against investment risks and responding to investors' needs saying that the new board of directors at the TSE follow a developmental approach toward the capital market and pursue policies aimed at integrating executive and trading processes of such deals.

Investors can trade futures in the equity market by analyzing economic conditions without the need to analyze each single share in such a way that investors’ returns equal the relevant index return, he said. In addition, portfolio managers can trade equity futures based on their own portfolios and cover the potential risks.

According to Sahraee, it is also possible for exchange traded funds to operate in the futures market within the frameworks proposed by SEO and benefit from risk coverage properties of such investment funds.

A capital market analyst says future contracts for asset portfolios as a hedging tool is ranked among the top four globally popular financial tools according to a report released by the World Economic Forum.

“The volume of futures deals around the world is much larger than spot markets”, said Hassan Qalibaf Asl, a  former TSE chief.

He talked about promising prospects for futures portfolios and said the tools will do well in the market because of their superiority in many respects over single-share contracts.

On the efficiency of the financial instrument, he said the role of derivative tools in hedging risks, diversifying asset portfolios and improving the price-discovering process is certain.

Given that the returns and risks are adjusted arbitrarily in these deals, more investors are attracted to the market. “As a substitute or complementary tool to spot market, deals in future markets are more convenient and more appealing”, he said.

In addition, liquidity gains accelerated pace in the capital market as investors need lower amounts of capital to invest in such markets.

Centenarian Investor

Mehdi Behrouzi, 102, is a centenarian shareholder and the oldest ever known in the Iranian capital market. He is a retiree of Marvdasht Sugar Company.

At a formal ceremony held in the town of Pasragard near Shiraz, Fars Province, this week, the head of Central Securities Depository of Iran (SAMAT) and a group of senior officials paid tribute to him.

According to SANA, Behrouzi has been active for over 40 years in the capital market and got a shareholder ID long ago to purchase shares of the sugar company he had worked for.