The contracts, denominated in Iranian rials and settled physically, will have maturity dates on a two month cycle. All transactions will be cleared and settled by CSD Iran, the Iranian clearing house.
TSE’s CEO, Hassan Ghalibaf Asl, said in a statement: “We are very pleased to develop a broader international investor base focused on the futures market. Moreover, offering the new product will help us broaden and deepen our market.
“We are committed to offering our members and investors a diversified product. At the first step, we offer eight futures contracts based on two listed banks, Parsian Bank and Karafarin Bank, and will expand it to at least 10 stocks by March 2011. The two stocks have been selected due to their substantial underlying liquidity and several tests,” he added.
Sources in the Middle East have suggested the move is designed to placate Iranian investors facing a strict regulatory climate and tough economic sanctions. Yesterday the European Union introduced a tougher than ever package of sanctions, barring European firms from investing in the Iranian oil and gas industries, or providing insurance to Iranian entities.
This climate is likely to mean EU players show very limited interest in the Iranian futures market. However, one senior market player said: “There’s a lot of movement in Tehran, lots of brokers pushing for new products. There’s a hell of a lot of interest from local investors.”
The bourse has recently introduced a new Sama futures trading system, developed in house with the support of the Iran Mercantile Exchange, which lists futures on oil, metals and agricultural products.
The equity derivative market’s opening ceremony was attended by Huseyin Erkan, Istanbul Stock Exchange’s president, and Ali Saleh-abaady, the president of the Securities and Exchange Organisation of Iran, as well as other authorities of the Iranian capital market.
By listing futures, TSE hopes to meet the needs of a wider range of investors, and give them diversification and hedging opportunities. The products will allow investors to bet on stocks with less money than buying them outright. The bourse also hopes equity derivatives will allow its participants a more efficient way of managing risk.
Keen investor base
Asked to gauge whether the contacts were likely to gain traction with investors, the source was pessimistic. “The question is these sanctions, and whether they’ll let [external] investors in. Their economic structure is in real trouble – it’s incredibly poorly run. Inflation is very high. They’ve started rationing petrol, simply because they haven’t got the infrastructure to fracture [oil]. Markets therefore need placating.”
There is, however, a strong base of talent in Tehran, he argued, a by-product of the recent difficulties faced by Iranian finance professionals gaining UAE visas and migrating to Dubai. “There’s no love lost between the two governments,” the source added. “[Iranian president] Ahmadinejad recently announced plans to price oil in dirhams, which would play havoc with the UAE markets.” The UAE lists and exports oil in dollars.
“It’s a very depressing place to be right now,” concluded the source. “There’s so much wasted potential. If Iran were an open society, then forget Dubai – they’d be the biggest base in the Middle East.”
Tom Osborn +44 207 779 8361 tosborn@fow.com