Tehran Stock Exchange & Shanghai Stock Exchange sign MoU

By: Amir Yousefian Pour, Chief International Officer, Tehran Stock Exchange Nov 2019

Tehran Stock Exchange (TSE) is dealing with a major transformation. The bourse is the oldest and yet largest entity in Iran's capital market, as well as one of the first regulated exchanges in the region, established in 1960s.

Its revamp started with the exchange's demutualisation in the mid-2000s - a turning point in its history - and ensured TSE met the highest standards in structural initiatives, governance development, entity formation, renewal of systems and infrastructure, as well as providing more depth, liquidity, and transparency to the market, and further protection to both individual and institutional players.

To achieve those high standards, we have worked hand-in-hand with the national regulator - Iran's Securities and Exchange Organization (SEO), which is an ordinary member of IOSCO. We also work closely with local entities, especially Iran Fara Bourse (IFB), in which we are a major shareholder, and with international partners to build a regulated market for more than 13 million local registered investors and thousands of foreign shareholders.

Tehran Stock Exchange was primarily mandated to develop a more diversified multi-asset marketplace from a simple equity exchange. Different kinds of bonds, including public and private participation papers and Sukuks, Exchange Traded Products (ETPs) and derivatives (futures and option contracts) are now tradable next to the classic equity trading of hundreds of listed companies. Each issuer is obliged to disclose at least 16 annual announcements on regular bases, as well as any corporate actions, forecasts and breaking news on the occurrence via a publicly accessible platform as a part of listing requirements. At the moment, about 95% of the listed companies report in compliance with the regulations, with a sharp improvement trend in the past several years. Beside local financial standards, the issuers are encouraged to observe international ones. Several directives and supportive regulations are endorsed to enhance the market's integrity.

Due to the historically bank-based financial sector in Iran, TSE is entitled to boost the public's awareness of investing in the capital market. Several courses, and a range of products and materials have been provided to the investment community, especially retailers through our headquarter in Tehran and 22 regional floors across the country. Transferring long and medium-term bank deposits to the capital market is on the agenda.

With GDP of USD450 billion (USD1.7 trillion PPP), and a population of 83 million people, Iran is one of the wealthiest and largest nations in the region. Hydrocarbon is the major sector in the country, ranking second in natural gas reserves and fourth in proven crude oil reserves to date globally. The agriculture and service sectors, next to several oil and non-oil industrial and manufacturing capacities are shaping the Iranian economy, as well as 40 listed sectors of Tehran Stock Exchange, giving it very unique diversification, and comprehensive investment opportunities. Almost 30% of national GDP is listed in the bourse.

The exchange, as a private entity, works hard to build up ties overseas, while tackling strong multiple headwinds at the same time. Despite advancements, TSE needs more product innovation and premium technology to outperform. To increase its investor base in international markets, therefore, it has so far signed 13 Memorandums of Understanding (MoUs) with global peers and exchanges, focusing on joint collaborations for mutually beneficial projects such as dual listings, disclosure improvements and innovations, to name but a few.

Most recently Tehran Stock Exchange and one of the largest global bourses, Shanghai Stock Exchange (SSE) have signed a cooperation document. A delegation from TSE paid an official visit to China and met with several authorities at SSE, as well as the China Securities Depository and Clearing Corporation (CSDC) in October 2019. It is expected that both nations will discover several opportunities in the securities industry. The unique growth capacity in Iran's market, particularly at TSE, synchronised with Chinese economic power and SSE's global linkages will forge a close and mutually valuable bond. Initial discussions have been made with our Chinese counterparts on initiative investment schemes, market technology, product diversification and cyber security.