Salaf Securities Worth Over $430m Sold via Iran Energy Exchange

EghtesadOnline: The Economy Ministry has procured 50 trillion rials ($438 million) for financing oil projects by selling standard parallel salaf contracts via Iran Energy Exchange (IRENEX).

News ID: ۷۴۸۵۶۶

29 September 2019

In the first round of initial public offering, the energy bourse hosted salaf securities worth 25 trillion rials ($213.6 million) earlier in September.

The pack was sold during a two-day offering when investors bought 1.7 million securities worth 13 trillion rials on the first day and the rest on the second day, IRNA reported.

During the second round on Wednesday, the second pack of securities valued at 25 trillion rials was offered in the domestic energy market, according to Financial Tribune.

The offer was welcomed by investors who bought a majority of securities worth 19 trillion rials on Wednesday. The remaining was sold on Saturday, according to IRENEX CEO Ali Hosseini.

Standard parallel salaf is an Islamic contract similar to futures, with the difference being that the contract’s total price must be paid in advance.

Salaf securities were offered by the Economy Ministry on behalf of the government on the derivatives market of the energy bourse.

“The derivative market of IRENEX has so far extended 168 trillion rials [$1.4 billion] to oil and gas projects,” Hosseini said.

According to the IRENEX chief, salaf securities will mature in 13 months and can be traded via call and put option contracts.

A call option gives the buyer the right, but not the obligation, to buy the underlying security at the exercise price, at or within a specified time.

A put option gives the buyer the right, but not the obligation to sell the underlying security at the exercise price, at or within a specified time.

The initiative is part of the current fiscal budget (March 2019-20) that allows the government to issue securities worth $3 billion (in rials and foreign currency) to finance oil projects.

Earnings from bonds should go for repaying the principal amount plus interest of matured bonds, reimburse liabilities to banks and pay contractors.