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Iran Capital Market Annual Report 2014

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Iran Capital Market Annual Report 2014 Securities and Exchange Organization of Iran ACRONYMS The Council Securities and Exchange High Council SEO Securities and Exchange Organization of Iran TSE Tehran Stock Exchange IFB Iran Fara Bourse IME Iran Mercantile Exchange IRENEX Iran Energy Exchange CSDI Central Securities Depository of Iran TSETMC Tehran Securities Exchange Technology Management Co. SIDS SEO Information Dissemination and Services SEBA Securities and Exchange Brokerages Association IIIA Iranian Institutional Investors Association Foreign Investment By-Law The By-Law Governing Foreign Investment in the Exchanges and OTC Markets The Act New Securities Market Act of Islamic Republic of Iran ratified in 2005 The Development Act The Law for Development of New Financial Instruments and Institutions ratified in 2009 CORE VALUES Justice Accountability Dynamism serving justice for accountability to all flexibility and adaptation investors and market market beneficiaries toward ongoing participants including investors, changes financial entities, and other national policy- making authorities Independence Excellence Meritocracy autonomy in decision commitment to highest hire, retain and train making levels of excellence in skilled and diverse work accordance with the force agency’s mission VISION SEO strives to be a dynamic, vigorous and effective organization to supervise and regulate the capital market with the aim of achieving a fair, just, efficient, orderly and regularized market through benefiting from advanced instruments, entities and financial markets. MISSION • Protect and safeguard investors’ rights • Organize, maintain and develop fair, transparent, and efficient securities markets • Supervise the performance of local security markets Height 2——Message from the Chair 4——Introduction 6——History Message from the Chair This is a moment of important transition for our country as well as our financial markets. As the regulatory and supervisory body of the Iranian capital market, the SEO keenly feels the impact and possibilities of this transition. We have witnessed a triumph of Certain factors are most often diplomacy and good sense recently, mentioned when analysts explain the as the long and complex negotiations drivers of opportunity in Iran. Iran’s between the P5+1 and Iran have demographic situation is very attractive. culminated in a win-win accord Our population is large with 80 million grounded in mutual respect and a desire people. It is young, with two-thirds below for peace. This accord has opened age 30. It is educated, with 25% having the way to Iran broadly engaging and connecting with the world again and we anticipate its full implementation in the near future. This new engagement is well under way at the governmental level. Over the course of the last few months, our country has hosted many ministerial and presidential delegations from across the globe. This new engagement is also under way at the private commercial level. We have some very good evidence for this: it’s difficult to get a hotel room in Tehran these days! But if you are coming to visit on capital markets business, please call on the SEO, as other visitors do almost daily, and we will help with your reservations! Iran’s commercial engagement with the world is nothing new. Many of you will know that we have a history as a center of commercial interaction and engagement. Two thousand years ago a university degrees. Our GDP is among network of transportation infrastructure the top twenty worldwide by PPP, even that was quite advanced for its time after decades of economic sanctions. allowed traders coming from China to Under the sanctions, Iran managed to follow the Silk Road across hundreds follow the guidelines of “economy of of kilometers of empty desert in central resistance”, proposed by the Supreme Iran to get to Europe. And surely there Leader of the Islamic Republic of were times in ancient history when it Iran, establishing a knowledge-based was difficult to secure a room in one of economy relying on domestic capacities our Silk Road caravanserai! and cutting dependence on oil revenues. But let me return from the interesting We are a very stable country in a chaotic past to the exciting present. region. We have a very strong diaspora. We have abundant natural resources 2 IRAN CAPITAL MARKET ANNUAL REPORT well beyond oil and gas. And we have on foreign nationals forming and owning who are willing to engage and work with diverse manufacturing and exporting companies in Iran up to 100%. us through the challenges will do best. industries. All this led Goldman Sachs a Let me address some of the major My last message to you is a message of few years ago to include Iran among the priorities and projects as our market welcome. We welcome you as partners “Next 11” fastest-growing economies opens up to greater international in our capital market, as advisors to after BRICS. participation. our institutions, and as intermediaries for connecting Iran further to global Our Stock Exchange is the oldest in the Our local market is currently grappling markets. We particularly welcome Middle East, founded about 50 years with a domestic shortage of credit and institutions that have a long-term ago. It is also one of the largest in the high funding costs of up to 30%. In horizon, are open to sharing their region, with a market capitalization of order to help address these, we wish to knowledge, see the value of a local around $104 billion. In addition to the develop the sukuk market, introduce new presence, and want to add something to TSE, we have three other exchanges: instruments such as new types of sukuk our local market. We welcome your visit Iran Fara Bourse for sukuk, derivatives, funds and derivatives, and broaden to learn the opportunities and meet the ETFs; Iran Energy Exchange for oil, gas, and sharpen the range of investment players for yourself. electricity and other energy carriers; options available to our investors. and Iran Mercantile Exchange for Because we expect our market players On a personal note, I’d like to ask you to agricultural and industrial commodities. and issuers to now deepen their foreign do leave some time to enjoy the ancient Our capital market financial institutions interactions, the SEO will also take steps Iranian culture when you visit. I’m will be familiar ones. We have 8 domestic to internationalize and enhance the confident that if you travel in Iran, you investment banks, 107 brokerages, over capabilities of our local players. will find that the message of welcome is 130 registered mutual funds, ETFs, extended to you by everyone you meet. portfolio managers, and investment Of course, we want our initiatives and advisory firms. enhancements to be sustainable, so As Iran demonstrates its long tradition they must be well-considered and of commercial openness, engagement Throughout Iran there is a wide range of obviously change will be gradual. Thus, and cooperation with its neighbors and investment opportunities across many Iran will be in a period of developing its friends, may I have the opportunity to industries. Some of these will be through soft infrastructure as it assumes a higher welcome you to Tehr an soon? government privatization plans. In international profile. During this period addition to capital investment needs and there will be emphasis on improving opportunities in our industries, we have policies and regulations, building needs and opportunities for investment relationships, and strengthening of management expertise. This should local players. Therefore, short-term be of interest to our foreign partners expectations should take account of this who are able to create value and drive soft infrastructure development. Mohammad Fetanat growth by bringing in their operational and managerial skills. In this initial period, there are important roles for our foreign friends to play. Let Our Foreign Investment Promotion and me mention some of them. Protection Act (FIPPA) was introduced in 2002 to enhance the legal framework We wish to improve policy and soft and operational environment for foreign infrastructures with consultation, and we investors. A license under this law welcome the views, opinions and ideas protects imported capital from political of international experts on improving risk. In addition, foreign investors may our economic climate. In particular, we readily hold securities on the Tehran welcome studying and learning from the Stock Exchange or Iran Fara Bourse. experience of other countries. We will of Furthermore, there are no restrictions course have challenges ahead but those MESSAGE FROM THE CHAIR 3 Introduction SEO has been committed to foster development of a securities market in terms of protecting investors, promoting fair, orderly and efficient markets and facilitating capital formation. SEO has been striving to bolster an environment so that investors could make better decisions and prevent any kind of fraud and abuse in the markets. SEO as a publicly owned, non- new technologies and interaction governmental entity is the main with investors and experts to take regulatory body of Iran securities into its daily regulatory operation. market pursuant to Securities SEO regulates stock exchanges Market Act of 2005. It is governed as they come into existence and by a non-partisan five-member develops toward evolution and board of directors and the CEO also supervises financial entities is appointed by the Minister of as key factors in the capital market. Economic Affairs and Finance. Iran capital market with more than To ensure the duty to be half a century of experience still is continually fulfilled, SEO is always and will be in pursuit cooperation engaged to enhance a regulatory of all market participants and structure through incorporating elites to provide local and foreign 4 IRAN CAPITAL MARKET ANNUAL REPORT investors with promising investing opportunities and familiarize them with Iran’s untapped and potent markets. Therefore, this report, while gauging SEO’s performance and progress, endeavors to catch a glimpse of different sectors of Iran capital market to show how developed the markets are, yet continuously thriving toward prosperity.
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