Iran to Launch OTC Forex Trading

EghtesadOnline: The soon-to-be-launched regulated foreign exchange market, the framework for which has been approved, will function as an over-the-counter market.

News ID: ۷۴۶۷۸۷

26 February 2019

Rules for launching the first-ever foreign exchange market in Iran were approved last month by the Money and Credit Council - a top financial decision-making body headed by the governor of the Central Bank of Iran.

The move seeks to create and organize a transparent market where foreign currency will be traded in cash through an electronic platform in the framework of MCC regulations.

It is yet another latent CBI measure to regulate a market dominated by informal traders. Currency trade went underground in the spring and summer of last year when the CBI banned all currency trade outside the banking system including the certified exchange bureaux, Financial Tribune reported.

Now currency trade takes place in a limited manner in currency exchange shops and the so-called integrated forex deals system known as Nima, which is a platform for exporters and importers to buy and sell hard currency.

CBI boss Abdolnaser Hemmati said in November the function of the market will be to discover prices and provide the people’s small needs and services.

An expert with the CBI confirmed to the Financial Tribune that market will be launched as an OTC and it will be hosted at the second head office of the CBI on Tehran's Ferdowsi Street. The framework for the market has already been approved internally by the CBI.

Five Key Entities

Fars News Agency reported on Monday that the regulated forex market will be registered on Tuesday with a board comprising five legal entities.

The entities are a subsidiary firm of the Informatics Services Corporation (owned by the CBI since the bank cannot directly sit on the board), Iran Fara Bourse (a junior stock market), and Association of Bureaux de Change Operators of Iran, Association of Private Banks and Association of Pubic Banks.

The official date for the launch of the market has not been announced. It will reportedly allow traders to engage in spot trade of five to six major currencies. According to FNA, some 600 exchange bureau, including those affiliated with banks, will participate in the market. The news agency, however, said one main unclear issue about the market is taxation including whether tax rebates similar to those enforced in the stock market will apply or not.

According to Hemmat, the market will be launched with the participation of banks and certified exchange shops under CBI supervision, adding that the focus of the market will initially be on cash transactions.

Exporters can also offer a part of their currency earnings in the market, he said, and hoped that the move would improve transparency and create the conditions for a moderate exchange rate.

Last September the Supreme Economic Council, an ad hoc decision-making body, headed by President Hassan Rouhani, gave the Hemmati authority to intervene in the currency market and take measures, whenever necessary, to stabilize the chaotic forex rates.

The currency market recorded fresh volatility in 2019 with the USD rate surging by 30% in the open market in the two months to Feb. 19.

After briefly approaching the psychological level of 140,000 rials earlier this week, the greenback lost some ground on Monday and was traded for 136,000 rials in Tehran.