Futures Unveiled in Tehran Stock Exchange

EghtesadOnline: Future contracts were officially launched for the first time on Sunday in the Tehran Stock Exchange on seven tickers.

News ID: ۷۸۴۴۰۷

18 December 2018

The equity futures were unveiled during a ceremony, attended by senior capital market officials, investment banks and brokerage firms, and held at the Central Securities Depository of Iran, the Security and Stock Exchange News Agency reported.

Shapour Mohammedi, chief of the Security and Exchange Organization - the sole regulator of the capital market – referred to risk management in the stock market as the main advantage of derivative tools and said investors can increase their profits with the help of such financial tools.

According to Financial Tribune, he expressed optimism about the future of the tools in the capital market noting that single share futures were unveiled last year and with launching future index on Sunday "we will witness derivative tools flourish even further."

Offering opportunity to investors seeking higher profits than is the norm via arbitrage is another important function of the derivative tools. “Arbitrage opportunities are indeed effective in balancing the markets” he said.

The SEO chief also talked about risk hedging feature of the derivatives and said the tool will encourage risk-averse investors toward investment in the capital market. It also “improves risk management of funds and investors to a large extent.”

Mohammadi said the SEO will launch two more capital market financial tools by March, namely warrants and short selling.

“These two financial tools complete the tool box of classic financial tools of the capital market.” He said launching Islamic financial tools and reinsurance security are also on the SEO agenda.

History of Derivate Tools

TSE director, another speaker at the opening ceremony, touched on the history of derivative tools in the TSE.

Ali Sahraee said Put Option was the first derivative tool to enter the TSE, which was originally used as an insurance tool but now is a financial tool. “The instrument pumped 23 trillion rials ($225.5 million) into the capital market in 2016-17.

Call Option was another tool offered in the market in 2016 which is now traded on the TSE. This, followed by single share futures and offering asset portfolio futures are the newest development in the capital market, he said.

Regarding the advantage of future contracts over spot shares, Sahraee said the tool is multifunctional  and has  qualities like risk hedging and leverage. He said unlike spot shares, futures create a two-way market which is its most significant feature.

He added that it is not necessary for investors to analyze each single share in asset futures. Additionally, there are some tax waivers for these shares that exempt investors from tax on dealing costs.

On the opening day of futures market, seven ticker symbols were offered the most important of which were shares of 30 companies including banks, car companies, chemical products and metal and mine manufacturers.