Stock exchange or stock market is a market where old securities that have been already issued by the companies and other organizations to the public are bought and sold through authorized agents according to certain rules and regulations.
Stock exchanges play an important role in the economic development of a nation. They serve as an economic barometer of a country. They perform several economic functions and render invaluable services to the investors, companies and to the economy as a whole.
Stock exchanges are also working hard to take advantage of the global opportunities that arise in this environment — whether by pursuing new listings from abroad or accessing foreign markets through mergers.
A stock exchange or securities exchange is an exchange (or bourse) where stock brokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments.
Listing standards, fees and regulatory environment are perhaps the final factors to consider when selecting a stock exchange, such as valuation, the quality of an exchange’s institutional investors and their understanding of a company’s business, the likelihood of attracting research coverage, visibility to customers and suppliers and comparable companies trading on the market.
- Marketability of securities
- Liquidity to investment
- Supply of long-term funds
- Evaluation of Securities
- The motivation for the companies for improvement in performance
- The assistance of capital formation
- Protection of Investors
- Encouragement of savings
- Listing of securities
- Maintaining business information
Procedure for dealing at Stock Exchange
- Selection of a Broker
- Placing an Order
- Making the Contract
Note: Before investing, it is always wise to learn the Basics of Stock Market.
The Tehran Stock Exchange (TSE) is Iran's largest stock exchange. It was established in February 1967, as the first Exchange in Iran. At the outset, only six companies were listed in TSE. The number of listed companies increased to over 420 by early 2000s. As of May 2012, 339 companies with a combined market capitalization of US$104.21 billion were listed on TSE.
The Tehran Stock Exchange (TSE) has started an ambitious modernization program aimed at increasing market transparency and attracting more domestic and foreign investors.
Since 1998 importers and exporters have also been permitted to trade foreign-exchange certificates on the TSE, creating a floating value for the rial known as the "TSE rate". In 2002 the "official rate" was abolished, and the TSE rate became the basis for the new unified foreign exchange regime.
Since 2009, Iran has been developing an over-the-counter (OTC) market for bonds and equities (aka Iran Fara Bourse or Farabourse). And As of July 2011, Farabourse has a total market capitalization of $20 billion and a monthly volume of $2 billion.
In 2008, commodity Futures came onto the Iran Mercantile Exchange (IME). In July 2010, TSE introduced six single-stock futures contracts based on Parsian Bank and Karafarin Bank, which will expire in two, four and six months.
Trading at TSE and Iran Fara Bourse starts on Saturday and ends on Wednesday.
Investors can place their orders with TSE accredited brokers, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements.
Tehran Stock Exchange has two equity markets, as well as two separated markets for bonds and derivatives.
The Tehran Stock Exchange Brokers' Organization.
- Board of Directors of the Organization
Board of Directors of the Tehran Stock Exchange Brokers' Organization.
- Investment Organization
Organization for Investment, Economic and Technical Assistance of Iran.
- Promotion Act
Foreign Investment Promotion and Protection Act.
- Foreign Investor
Natural Person or legal entity of foreign origin who, under the Foreign Investment Promotion and Protection Act, and in compliance with the articles of the present regulations, buys and/or sells securities in the Stock Exchange.
- Foreign Portfolio Investment
Transaction of the listed securities by a Foreign Investor, solely to get profit, not willing to access to the management of the company. The term Foreign Investment in the present regulations solely means this kind of investment.
- Direct Foreign Investment
The purchase of listed securities by the Foreign Investor in order to get profit and access to the management of the company.
- Trusted Auditor
The auditing firm, member of Iran Registered Auditors Association, appointed by provisions of the trusted auditing firms and legal inspectors of the Tehran Stock Exchange, ratified by the Council of the Stock Exchange in 3 Khordad, 1378 (24 may, 1999).
- Global Depository Receipt
A negotiable certificate issued by a foreign bank in two or more countries representing the ownership of a specific number of an Iranian listed company's deposited shares held by the issuer bank. This certificate is issued according to the previous agreement between the Iranian issuer of the shares and the foreign bank by the approval of the Stock Exchange.
The mechanism for which the price of equities is determined is as follows:
- The best price (price priority)
Under the price priority rule, a selling (buying) order with the lowest (highest) price takes precedence
- Time of order priority
Under the time priority rule, an earlier order takes precedence over others at the same price.
Thus, when the lowest sell and the highest buy orders match at price, the transaction is executed at the price. In short, the TSE market is a pure order-driven Market.
1. Increasing the share of the capital market in financing the economic productive activities
2. Applying effective rules and procedures to protect the market's integrity and shareholders' rights
3. Expanding market with the use of updated and efficient technology and processes
4. Developing financial knowledge and improving investment and shareholding culture in Iran
5. Treating all stakeholders with the principles of accountability and transparency
6. Constant expansion of the company's intellectual properties and human resources
7. Value creation for the shareholders
The most important advantage that Iran's capital market has in comparison with other regional markets is that there are 37 industries directly involved in it. Which makes it unique in the Middle East.
The second advantage is that most of the state-owned firms are being privatized under the general policies of article 44 in the Iranian constitution. Under the circumstances, people are allowed to buy the shares of newly privatized firms.
Though the foreigners were able to invest in the Iranian capital market before the above rule’s ratification, the new regulations have facilitated the investment. (Read more)