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Home , Market capitalization, Tehran Stock Exchange

A Guide to Exchange (TSE)

Promising Destination for TSE at a Glance

Trading Days Saturday to Wednesday Hours 9:00 to 12:30 (preopening: 8:30 to 9:00) System Automated, order - base Mechanism , continuous trading Maker Mandatory in all markets

Shares & rights, participation certificates, , bank certificate of Exchange-traded securities deposit, stock futures and contracts Currency Diversified Market Prices (minimum, maximum, last and closing), indices, ' On-line information information, trading volume and quotes Exciting Opportunities Depository, and Settlement Depository and settlement Central securities depository of (CSDI) T+2 (shares and other based securities) – T+1 (participation Period certificates, sukuk, ) Settlement in brokerage level and nonphysical settlement in Settlement customer level Clearing Multilateral netting Taxes Tax exempt Tax exempt 0.5% of trading value (Since July 2018, transaction tax has been Transfers (seller) reduced to 0.1% temporarily) Trading Commissions (Shares & Rights) Buyer (%) Seller (%) Securities & Exchange Organization (SEO) 0.03 0.03 TSE 0.032 0.032 0.38 0.38 Central Securities Depository of Iran 0.012 0.018 (CSDI) Tehran Securities Exchange Technology 0.01 0.015 Management Co. Total 0.464 0.475 Structure and Regulations Legal Joint stock Regulations Self-regulated under SEO supervision Share ±5%, right ±10%, debt ±5% and ETF without volatility Closing pricing Weighted average with base volume Foreign investment Yes (According to foreign investment bylaw)

2 TSE A Guide to TSE 3 History

TSE was established in February 1967. During its first year of activity, only six securities (2 companies equities and 4 other instruments) were listed in TSE. Then Government bonds and certain state-based certificates were traded in the market. With half a century of experience, today TSE has evolved into an exciting and growing marketplace where individual and institutional trade securities of about 326 companies with over USD 95 billion (July 2018). Tehran celebrated its 50th anniversary in 2018. Five decades of activity in Iran’s economy has turned TSE a pillar of development in the country. Listed companies are among 40 different sectors, and recently several new entities and instruments have been introduced in the of Iran, for more than 10 million registered , both as individual and institutional.

4 TSE A Guide to TSE 5 Timeline

1966 1967 1975 1992 1995 2002 2003 2005 2006 2007 2010 2012 2013 2014 2015 2016 2017 2018

Ratification Inauguration Progress due Joining Joining Market Authorizing New Demutualiza- Launching Approving Launching Trading Launching Improving The first Launching • • • • •Upgrading • of the to international Federation development: listed structure; tion of TSE the the a localized hours the first ETF liquidity infrastruc- IPO through Basket establishment Federation of Euro- companies privatization regulations derivatives extension; through tures; book building Futures Ratification Launching Ratification law of • of Stock Asian Stock • to issue debt • of state- governing product – lowering mechanism; of the law for trading floors of new Launching the stock Exchanges Exchanges; securities owned the foreign embedded • base •Debt market development in provinces; securities online Commence- exchange (WFE); full founding companies investment volume; extension; • of producing market law trading ment of on- member member Principal in the firms’ shares • access for Extending •Inauguration line access steps for exchanges • ownership; futures daily price of options to options disclosure of and OTC contracts market; markets; limits market; • Ratification information, of the law for training and TSE self- •Launching • •Upgrading tax incentives development futures listed the trading for the TSE of (single system listed products stock futures) companies and online trading

6 TSE A Guide to TSE 7 Legal Structure

The new Securities Act which is more TSE has been demutualized i.e. the membership comprehensive and advanced than the previous organization entity was turned into a public joint TSE Family /5 December 2018 one was passed on 16 November 2005 by the stock . Iranian parliament to support investors’ rights and The Council is the highest authority and is TSE aimed at organizing, preserving and developing a responsible for all related policies, market transparent, fair and effective market. strategies, and supervision of the market. TSE is conducted and supervised by a seven-member board of directors that sets strategy and operating Under the new Act, the Securities & Exchange SEO will be responsible for administration and policy. These individuals, elected for a term of two years by shareholders’ General Assembly appoint High Council and the Securities and Exchange supervisory duties, governed by the Board of the Chief Executive Officer. The CEO’s term of office is for a renewable two-year tenure. Organization (SEO) were introduced and created Directors. The SEO’s Board of Directors will be as regulators of the Iranian capital market and elected by the Council. Organization Chart

General Iranian Capital Market Compensation Assembly Committee

Board of Strategic & Risk Securities & Exchange High Advisors Management Council Directors Committee

Board of Internal Directors Auditing Secretariat Auditing Committee Securities & Exchange Central Securities Depository Technology Management Co. Organization (SEO) of Iran (CSDI) (TSETMC) Advisors CEO

CEO Office Tehran Stock Exchange Iranian Mercantile Iran Farabourse Iran Energy Exchange Public Relations (TSE) Exchange (IME) (IFB) (IRENEX) & International Legal &Contracts Affairs Construction Development Financial Institutions Management

Investment Investment Asset managers Mutual funds Data vendors banks companies Issuers and Development Logistics Deputy Market Deputy Members Deputy Deputy

Research & Finance Issuers Operations Development Securities & Exchange Brokers Iranian Institutional Investors Association Association Administration Statistics & Organizational Information Excellence

Information Market Technology & Members Investment Systems Surveillance Development

8 TSE A Guide to TSE 9 Mission

Launching a fair, efficient and transparent market equipped with diversified instruments and easy access to create added value for the stakeholders.

Vision

The region’s leading Exchange and country’s economic growth driver

Goals Roles of TSE Increasing the number of listed companies, improving market liquidity TSE’s primary roles are: Establishing, organizing and managing of the Enhancing TSE brand and promoting the Stock Exchange in order to trade listed securities transparency as the company’s image Listing of securities Further development of technology Prescribing membership requirements for infrastructures to enhance market surveillance members and supervising their performance, and Developing financial knowledge and improving regulating their activities investment and shareholding culture in Iran by Overseeing the transactions of the Exchange educational programs and use of mass media to listed securities reduce investment risks and increase transparency Monitoring the performance of issuers of the Developing channels of knowledge-sharing listed securities with other exchanges Processing and disseminating the information regarding the securities orders and transactions  expansion by introducing of securities new options contracts Introducing new kinds of ETFs Introducing new kinds of project funds Increasing the volume of floating Expansion of debt securities by introducing Islamic treasury bills and participation certificates

10 TSE A Guide to TSE 11 Market Segmentation

Main market First market Equity Subsidiary market Second market

Participation Ijarah papers Capital and Shareholders Debt Sukuk Istisna The capital stock of the Company is equal to the Class two: Financial institutions other than sum of IRR 1.5 trillion, which is composed of 1.5 brokerage firms who shall receive the activity Certificate of Murabaha billion registered common shares at IRR 1000 license from the SEO. deposit each. Shareholders of the Company shall be Class three: All persons other than class one or classified as follows: two above. Class one: Persons who have received the The maximum percentage of shares belonging TSE license for brokerage activities in compliance with to each class of shareholders defined above will the Stock Exchange Establishment Law [1966] or Equity be determined by the SEO. At the moment, no those who shall receive the license for broker/ individual of any class can hold more dealer activities in compliance with the Securities than 2.5 percent of the Exchange’s total number Act [2005] and shall be accepted as the members Real estate of shares. The maximum ownership percentages of the TSE. are 40, 40, and 20 percent respectively for each ETF class. Fixed income Owners of TSE (May 2018) Balanced

Shareholders No. of shareholders No. of shares Percent Brokers 80 509,469,986 33.96 Financial institutes 95 589,139,986 39.28 Individual investors 6,721 401,390,028 26.76 Options Total 6,896 1,500,000,000 100 Paid in capital (Rials) 1,500,000,000,000 Embedded Derivatives Market capitalization (Rials) 4,938,000,000,000 options

Futures

12 TSE A Guide to TSE 13 Derivatives Market

Two types of derivatives are currently traded at Instruments TSE. Futures: Equities The first contract of this instrument was traded The shareholders are able to trade all shares or on 25 July 2010. rights of listed companies in 40 industries at TSE. There are indices based on Broad Index or Options: Industrial Index on which are provided some new A localized form of options called Embedded Put instruments. Options has been trading at TSE since 15 August Debts 2012. The types of tradable debts are: Additionally, after a while, conventional kinds of options contracts were introduced on 18 Participation papers December 2016. Sukuk: Including Ijarah, Istisna, and Murabaha Certificate of Deposit (CD) Funds Funds are divided into two categories in Iranian Capital Market.

Mutual Funds Exchange-traded Funds (ETFs)

The first in Iranian Capital market This instrument was launched on 25 January was launched on 14 June 2007. There are about 2014 in TSE. Regarding the management style, 170 Mutual Funds in the Iran Capital Market. both of Index ETFs and active ETFs have been Regarding portfolio, Mutual Funds are divided listed on TSE and in terms of underlying assets, into 3 principal types in Iran: equity ETFs, fixed income ETFs, real estate ETFs and balanced ETFs are the types of TSE’s ETFs. Equity fund More than 10 ETFs are tradable in TSE. Fixed income fund Hybrid (or balanced ) mutual fund

TSE New Building (Under Construction) 14 TSE A Guide to TSE 15 TSE’s TSE’s International International Relations Relations Tradable Instruments Iran’s Capital Market in TSE Memberships MoUs Financial Entities:

1. Equities 1. Malaysia 2007 1. Brokerage firms 2. Rights 2. Indonesia 2008 2. Investment bank firms 1992 3. Investment funds 3. Debt securities 3. South Korea 2009 4. Investment firms (Islamic participation papers, , CDs) 4. Cyprus 2009 5. Holding firms 4. Futures contracts 5. Damascus 2010 6. Market makers 5. Option contracts 1995 6. Lahore 2011 7. Portfolio managers 6. Exchange-tradad funds 7. Kazakhstan 2011 8. Karachi 2012 8. Investment consultants 2008 9. Muscat 2014 9. Financial information analysis firms 10. Istanbul 2015 10. Listing advisors 11. Athens 2016 11. Offering advisors 12. Munich 2016 2008

16 TSE A Guide to TSE 17 How to Invest Investing in Capital Market

As the first step, an needs to contact a The FIPPA (Foreign Investment Promotion Upon the recommendation No. 22159 of the the Iranian capital market before the above brokerage firm and submit required documents and Protection Act) license is recommended Ministry of Economic Affairs and Finance on rule’s ratification, the new regulations have for obtaining a trading code. The brokerage for the foreign investors. It is provided by 11 April 2010, and by virtue of the paragraph facilitated the investment. Currently foreign firm delivers the client’s required documents Organization for Investment, Economic and 3 of article 4 of the Securities Market Law of investors are categorized into two main groups: to Securities and Exchanges Organization Technical Assistance of Iran (OIETAI) and can I.R.I ratified in 2005, the Council of Ministers Strategic and Non-strategic investors. Those (SEO) and asks for confirmation and approving. facilitate investors’ repatriation. approved “The Regulations Governing Foreign with up to ten percent of ownership in any Investment in the Exchanges and OTC Markets” listed company’s equities are Non-strategic SEO will issue a license in 7 -10 working days. on 18 April 2010. The text of the regulations foreign investors, who have no restriction for One day after issuing the license, the Central can be found at http://tse.ir/cms/Page81.html the earnings and principal capital repatriation. Security Depository of Iran (CSDI) will provide However, the investors willing to own more a trading code. This process will be lengthier Though the foreigners were able to invest in for institutions than individual investors. The licensed investor can trade through a direct brokerage service or the on-line trading system.

Request for Reconsideration

Submission of Review of Issuance of Investment Communication Application to Report to FIB* Application By Investment License of Draft License OIETAI FIB License Communicated

Request for Reconsideration

5 Days Max 10 Days percentages in TSE’s listed companies are investors shall not exceed twenty percent considered as Strategic foreign investors. For of the total shares number of the companies this group, the principal capital repatriation listed in the Exchange, or twenty percent of will not be sooner than two years. the shares number of any company listed in the Exchange. * FIB = Foreign Investment Board Based on the mentioned regulations, the number of shares owned by the total foreign Reference:https://www.investiniran.ir/en/investmentguide/procedure

18 TSE A Guide to TSE 19 Steps to Apply for Foreign Investment Financial Performance Disclosure 1. Approaching a brokerage company 2. Completing an application Form According to Disclosure Rules and Regulations, company and consolidated group which should issuers have to provide and disclose the be disclosed at least 10 days before the Ordinary 3. Providing establishment license/primary financial statements and reports based on the General Assembly and Maximum 4 months after agreement/preliminary agreement of the national standards or forms delivered by SEO in the fiscal year. The other one is non-audited 3, pertinent Iranian organization a regular period. 6 and 9 month periodical financial statements which have to be disclosed, maximum 30 days One of the most important reports is the after three-month periods. audited annual financial statement of the main IFRS

About all banks and financial institutes and all IRR 10,000 billion and more, have to provide insurance companies, registered in Securities their annual financial reports based on IFRS. and Exchange Organization that their fiscal Regarding the International Financial Reporting Protecting Foreign Investors years start from 20 March 2016, are obligated Standards, as the most companies with this to provide their own financial statements obligatory, should provide the consolidated according to IFRS. Besides, the companies listed financial statements, their subsidiaries have to at TSE and IFB which their financial statements To attract foreign investors to Iran’s capital principles regarding “protection of investors” do the same. market, TSE has to assure them with legal which are also applicable to the Islamic capital start from 20 March 2016 and their capital are procedures and rights protections. The markets. foreigners can be referred to “Department of Moreover, TSE supervises issuers’ information Investigation of Complaints and Legal Aids” to disclosure according to nationally and deliver a complaint to SEO. The department’s internationally accepted accounting policies aim is protecting investors’ rights in the capital and auditing standards. It also investigates market within Legal Division of SEO and in any biased and misleading information to help accordance with Article 25 of Administrative provide orderly markets. It is worth to mention Integrity Promotion and Anti-Corruption Law. that there is an Anti-Money Laundering This department processes all claims received Committee which has been formed pursuant from the self-regulatory organizations (SROs), to 2007’s Anti-Money Laundering Law and issuers, financial institutions and investors, aims to hold close ties with other national and and consequently responds to them in the due international agencies to combat activities course. Furthermore, this department strives to such as churning, money laundering, and comply with the latest international standards financing terrorism in the capital market. and norms such as the IOSCO’s directives and

20 TSE A Guide to TSE 21 Brokers Rating Online Trading System

Securities & Exchanges Organization is responsible publishing the results annually. Each change in criteria or Online trading makes transactions easier for rating brokerage firms in Iran’s capital market and the way of disclosure of rating will be under SEO’s review. to monitor, clear, and settle and this helps motivate its development.

Online Trading System in TSE related processes are done via on-line system. Rating Listed Companies It covers the meaning of not only buying and Launched from June 2010, it provides investors selling operations, but also all bank operations with the fast, easy and reliable access to Tehran Regarding (CG) principles the Corporate Governance assessment. These do through online method. The customer Stock Exchanges’ trading system. Reviewing observation among TSE’s listed companies, the standards are development instruments and sends his/her order to the electronic trading the trend of online trading system shows the Exchange is aiming to provide with suggestions have been provided to help corporates improve system of a broker through the computer, the increasing growth of investors’ tendency in for CG principles implementation and a their performance and CG reporting. customer’s account will be blocked as much questionnaire for ranking the listed companies. using the new system, so that around 6% of According to TSE’s studies, and based on as trading value of the order by the broker and Meanwhile, TSE is determined to provide and total trading values in 2012 and around 30% of Organization for Economic Co-operation and then the order enters the trading system and issue its corporate governance report based total trading values in 2018 are accomplished Development (OECD)’s survey and guidance, the customer receives the result at the same on current regulations voluntarily to clarify by the on-line system. listed companies observe partially the speed. If the order, for any reason, is cancelled, the status of CG international standards Corporate Governance rules and regulations. Online Trading Process the blocked money in the customer’s account implementation. will be released. On-line trading is supported by TSE disclosure regulations can contain most of In electronic trading, sending orders, banks and the most of brokerage firms. The multiple criteria have been considered CG rules and help the level of CG in the listed brokers’ communication, settlement and other for determining the appropriate standards for companies.

22 TSE A Guide to TSE 23 Contacts

Tehran Stock Exchange Legal Affairs TSE Listing No. 192, Hafiz Avenue T +98 21 6675 0079 1138964161 F +98 21 6670 6127 The companies main listing requirements, such operation periods, on the different markets and as capital, number of shareholders, percentage boards, hav been summarized in the following Tehran, Iran of free float ratio, number of profit-making table. www.tse.ir Financial Department T +98 21 6675 0084 PR & International Department F +98 21 6675 0085 Listing Requirements T +98 21 6674 0341 First market Description Second Market T +98 21 6673 0776 IT Main Board Secondary Board F +98 21 6671 0111 T +98 21 6676 0545 Registration with SEO    Public joint stock co.    E [email protected] F +98 21 6671 6571 Paid in capital (IRR b.) 1000 500 200 Minimum number of business activity 3 3 2 (years) Minimum free float ratio (%) 20 15 10 Key Addresses Minimum number of shareholders 1000 750 250 Minimum record of profitability (years) 3 2 1 Equity to total asset ratio (%) 30 20 15 Securities and Exchange Iran Energy Exchange Organization Market makers* Obligatory www.irenex.ir * Market making is obligatory for all newly listed companies since 30 December 2017. Previously, this was optional for the www.seo.ir listed companies of the first market. Central Securities Depository of www.ime.co.ir Iran www.csdiran.com If a company loses the listing requirements, it will Also when a listed company in Iran Farabourse Organization for Investment, be delisted from TSE. Preventing a lag in trading meets the requirements of TSE’s listing, it will be Economic and Technical Assistance of such companies, each delisted tickers will be transferred to TSE. Tehran Securities Exchange of Iran transferred to Iran Farabourse. Technology Management www.investiniran.ir Company www.tsetmc.com

Iran Farabourse www.ifb.ir

24 TSE A Guide to TSE 25 About TSE’s Logo

Circular standard carried by two bulls and adorned with four revolving men Luristan (Iran), 2nd millennium B.C. Bronze Acquisition, 1893

In the center of the standard, four characters with intertwined legs seem carried away in an endless round. They hold vases from which water flows, forming a large circle which surrounds them. Small ducks adorn the rim and a recumbent animal surmounts the standard. The decoration may resent a cosmological symbol, which is hard to identify. Purchased in 1893 by the Musee du Louvre, this object is one of the first Luristan bronzes to enter a public collection. It served as the model for the logo of Tehran Stock Exchange.

26 TSE A Guide to TSE 27 28 TSE