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Tehran bourse moves towards options launchIran’s bourse plans to expand its fledgling derivatives market by launching options in the coming months despite the cold shoulder traders have given to single stock futures.
Tehran Stock Exchange, whose operations are limited mostly to stocks, warrants and bonds, introduced single stock futures in July 2010 to help diversify, vowing to add options and stock index futures as next steps in the development of the country’s capital markets.Soudabeh Einali, a senior official in the exchange’s research and development department, said final preparations were under way to meet the deadline. “The options have been approved from the religious point of view and we are in the final stages of drafting regulations, listing contracts and customising software,” said Ms Einali.
Bourse officials have promised to launch the options by October but market analysts say the introduction could be delayed to the end of this year.
Her department is in charge of regulating options, which are to be approved by the Securities and Exchange Organisation, which also supervises the exchange. No time frame is set for the launch of stock index futures. Traders suspect it could be next year.
The Islamic regime has overcome religious hurdles for futures trading. A committee, comprised of clerics and lawyers, has set a requirement for the physical delivery of the underlying asset in a futures contract or the option holder faces a 1 per cent fine if the futures contract expires with cash settlement. This, in theory, allays concerns under sharia law about speculation.
The main concerns are related to traders’ unfamiliarity with the concept of futures and poor education about the product. These have combined to keep levels of futures trading low, at only 650bn rials ($61.9m) over the past year, while daily trading of stocks stands at about $40m.
Futures trading is also being held back by the structure of Iran’s bourse, where quasi-state companies are dominant. “Many companies do not yet know how to deal with the futures and cannot adjust their accounts to the futures contracts,” said Shervin Shahriari, the fund manager of Turquoise Partners, the largest foreign investment fund in the market.
However, futures have had more success on the Iran Mercantile Exchange, where industrial and agricultural goods as well as oil byproducts are sold. The commodities bourse started selling gold coin futures in 2007.
The number of such contracts since the Iranian new year began on March 21 has exceeded 321,000, a 681 per cent rise on the corresponding period the previous year. Value traded has risen by 1,000 per cent to $1.4bn over the same period.
Farzad Heybati, trading manager of Pars Ide Bonyan Brokerage, which has been active in gold coin futures, said this showed futures would develop. “The futures market in Iran does not need 150 years to find its place; rather, in a few years’ time it will turn into an attractive market,” he said.
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