Derivatives Market Continues to Evolve

EghtesadOnline: Iran Mercantile Exchange on Monday added three items to the repertoire of trading instruments of its derivative market.

News ID: ۷۸۷۴۷۴

21 December 2021

It launched copper futures and commodity-linked certificates of deposit for copper and rebar in a ceremony attended by the head of Securities and Exchange Organization Majid Eshqi, Economy Minister Reza Fatemi Amin and a group of lawmakers, the Securities and Exchange News Agency reported.

As per an earlier announcement, copper futures are backed by  copper cathode, which is the main ingredient in copper production. Cathode is the starting point for processing copper.

Each futures contract is backed by 100 kilograms cathode and buyers can purchase maximum 25 contracts in each transaction at a daily price spread ranging from -5% to +5%.

Addressing the ceremony, Eshqi said futures and commodity-based CDs are another step toward expanding the IME’s role. “The CDs will enable both wholesale and retail in the IME,” he was quoted as saying.

Other commodities “that are capable of being securitized” can also be traded in the derivative market in the near future.

Commodity CD is a security indicating ownership of the holder on a particular amount of a commodity supported by standard warehouse receipt issued by warehouses certified by the Securities and Exchange Organization, the Iranian capital market regulator.

Selling a CD in the primary market means selling the stored or deposited commodity by the owner, and buying it means buying of such commodity. CDs securitize a company’s product inventory and offer buyers easy ownership of goods without the usual hassles of storage and insurance.

Founded in 2006, IME trades in agricultural and industrial goods plus petrochemicals in the spot and futures markets. The market has also launched future contracts for silver and selected agricultural goods like saffron, pistachio and cumin.