Iran's Securities and Exchange Launching Equity Futures

EghtesadOnline: The chief of Securities and Exchange Organization – the sole regulator of the capital market – said the market for trading future contracts will be launched before the new year sets in.

News ID: ۷۴۶۳۲۱

11 December 2018

Shapour Mohammadi said futures will be offered on shares of 30 leading companies.

The milestone decision to launch futures, which most likely would be hosted by Tehran Stock Exchange,  will give investors new hedging tools to take long and short positions on companies, especially at a time when foreign investments in Iran’s stock market could  take a hit from the new US sanctions.

Iran Mercantile Exchange has already launched gold coin and saffron futures and has mulled the creation of currency futures, Financial Tribune reported.

A capital market expert says the ground is paved for futures to be launched in the capital market and the mechanism for trading these shares will be developed soon.

Mohammad Reza Khajehnasiri, a board member of SEO said that in recent years the Jurisprudence Committee of the SEO that oversees compliance of capital market instruments with sharia rules has approved the relevant regulations.

Khajehnasiri said the new financial instruments will enrich the capital market and fill many gaps. "In the present conditions new financial tools will increase the variety of investment ventures to a large extent and attract investors."

He elaborated on the opportunities the instruments can offer to the capital market and said one advantage is that shareholders would be able to make a profit both in bear and bull markets by predicting future trends. That is "when the market is up shareholders sell their futures and buy ordinary stocks.

Risk coverage is another merit of exchanging futures in the capital market."Risk coverage is a salient feature of these types of shares, which yield good profits in times of market volatility", he told the Security and Exchange New Agency (SENA).

New Round of Oil Trading

The head of Security and Exchange Organization added that the next round of oil trading in the capital market will start after the technical requirements imposed by the  Oil Ministry are met.

"The Oil Ministry may need special directives (from the  Supreme Council of Economic Coordination) about some issues, but generally there is no obstacle for trading crude oil on the Energy Exchange" Shapour Mohammad  was quoted as saying by Fars News Agency.

Mohammadi said in addition to trading oil on the Iran Energy Exchange through previously proposed methods, which stipulate payments to be settled 80% in foreign currency and 20% in rial, it is possible to trade entirely in the national currncy." This is an issue for which the Oil Ministry needs new directives.”

Offering crude oil on IRENEX is considered as a viable alternative and a new avenue  by oil officials to compensate for the loss in oil export following the imposition of new of US sanctions on November 4, which targeted key industries, namely export of oil and  derivatives.

The second phase of offering crude oil on IRENEX was successfully carried out in November  when 700,000 barrels were traded at $64.97 per barrel. This is while 280,000 barrels at $74.85 were sold during the first phase on October 28.

Accordingly, eight cargos of 35,000 barrels and 20 cargoes of 35,000 barrels were traded during the first and second phases respectively, indicating a successful pilot program  offered on IRENEX.

Crude oil was offered at base price of $79.15 and was sold at $74.85 per barrel during the first trading session, while the base price during the second offering was $71.59 and $64.97 was the final trading price.