Iran's Regulated Forex Market Launches Pilot Trade

EghtesadOnline: The regulated foreign exchange market that is slated to commence work by mid-May has already launched its pilot trade.

News ID: ۷۴۷۱۵۹

28 April 2019

According to details provided by IBENA website -- affiliated to Central Bank of Iran -- the market will deal in wholesale currency in banknotes with exchange bureaus and banks.

This means that retail forex trade will be the function of currency offices outside of the regulated forex market.

The venue of the market is the second head office of the CBI in Ferdowsi Street in downtown Tehran, Financial Tribune reported.

The CBI has obliged exchange offices that operate in the market to open two accounts, one forex-based and another rial-based to process the trades.

A monitoring body within the regulated forex market will have access to the accounts and only allow transactions for which there is equivalent amount in their account. In other words, the trade orders will be based on the balance in the said accounts.

The regulator also makes it mandatory, as is usual with stock markets, that there should be a bulletin in the regulated forex market to display prices online.

Rules for launching the first-ever forex market in Iran were approved in January by the Money and Credit Council - a top financial decision-making body headed by the CBI boss.

CBI said last week that the board of directors of the regulated forex market had appointed the CEO of the market. They also agreed on procedures through which authorized exchange offices and agent banks operate as brokerage within the regulated market.

The market will be launched with the participation of banks and certified exchange shops under CBI oversight. It is reported that the deals within the regulated market will be processed according to a “order driven” mechanism.

The market comprises the Association of Bureaux de Change Operators of Iran, Iran Fara Bourse (a junior stock market), Association of Private Banks, and the Association of Public Banks.

As for pricing, the market is tasked with drafting a trading by-law, approved by the CBI, based on which the prices in the closing hours of each trading day determines the next day’s price with a difference not more than 5-10%.

However, in special circumstances, the market may adjust the differential in coordination with CBI.  The initiative is seen as another CBI measure to regulate the chaotic forex market dominated by informal traders.

It seeks to create and organize a transparent market where foreign currency will be traded in cash via an electronic platform.

Currency trade presently is conducted 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 currency.

The market is expected to be attractive enough for exporters to encourage them offer their export earnings in the market, over time compete to curb currency rates, and bridge the gap between the regulated market rates and Nima rates.

Nima is a system developed by the CBI as a venue where companies sell their export earnings at rates lower than the open market.

Lower exchange rates in Nima compared to the open market has tempted most exporters not to repatriate their earnings to the CBI-controlled system.