In a ceremony on Sunday, Tehran Stock Exchange (TSE) officially launched futures contract, a new financial instrument in Iran’s capital market.

Futures contracts (more colloquially, futures) are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
The ceremony to launch the futures contract, which was held at the place of Central Securities Depository of Iran (CSDI), was participated by a number of Iranian capital market official including Iran Securities and Exchange Organization (SEO) Head Shapour Mohammadi and TSE Head Ali Sahraei.

CSDI is the sole registrar, central custodian and clearing house for the Iranian financial market of four exchanges including TSE, Iran’s over-the-counter (OTC) market known also as Iran Fara Bourse (IFB), Iran Mercantile Exchange (IME), and Iran Energy Exchange (IEE).

Addressing the Sunday ceremony, TSE Head Ali Sahraei said that futures contract is one of the risk management tools (also called hedging tools) which is today becoming operational at the TSE.

He said: “Jurisprudence Committee of the SEO [which oversees compliance of capital market instruments with sharia rules] has approved the regulations related to the futures and we hope that it will act as a highly-applied derivative for hedging in the capital market.”

“Today we launch futures for seven indexes mainly in vehicles, banking, base metals, minerals, refined products and petrochemicals sectors”, Sahraei further announced.

‘Futures highly significant for market balance’

Addressing the same ceremony, SEO Head Shapour Mohammadi said that futures are some very important instruments for the market balance, while they are also some strong hedging tools.

They provide investment opportunities for those who are seeking the amount of profit more than they can earn in the normal market deals, the official noted.

He further highlighted the significance of taking the advantage of new financial instruments to grab the opportunities for market arbitrage (purchasing and selling the same security at the same time in different markets to take advantage of a price difference between the two separate markets).

He also announced that launching short-selling and warrant by the end of the current Iranian calendar year (March 20, 2019), Iran’s basket of capital market’s classic instruments will be complete, “while we are already complete in terms of Islamic financial instruments including sukuk.”

Elsewhere in his remarks, Mohammadi referred to the noticeable growth in the number of financial entities in the country and said, “We will have 650 financial entities by the end of current [Iranian] year that can strengthen all these instruments.”

‘A turning point in developing new financial instruments’

Mahmoud-Reza Khajehnasiri, a board member of SEO, was the other speaker in the ceremony, who said that the speed of launching and operating the new instruments in the stock market of country indicates the proper group work behind it which is a turning point in development of new financial instruments.

He believes that the new financial instruments will empower the capital market and fill many gaps. “Enjoying these instruments and specialized financial entities we will bring wealth and profit”, he stressed.