How is a foreign trading account created in Iran’s capital market?
The investor sends the request form for trade permission to Securities and Exchange Organization of Iran (SEO) based on SEO’s criteria for granting permission through an eligible broker. Whenever the permission is issued, the broker sends it along with the request form for account creation to Central Securities Depository of Iran (CSDI) so that the trade account is issued.
Please refer to: https://en.seo.ir/Page/278/Forms
Who guarantees and facilitates the transfer of instruments’ possession and money between the buyer and seller in Iran’s capital market?
CSDI is the central registrar and clearing house for all the exchanges in Iran including Tehran Stock Exchange (TSE,) Iran FaraBourse (IFB,) Iran Mercantile Exchange (IME) and Iran Energy Exchange (IEE). It takes over the registry, clearing and settlement issues related to equity, Islamic securities (Sukuk,) derivatives, energy contracts, electricity, mercantile products by means of a full-fashioned registry system and multi-currency.
How long does the process of securities trading settlement take in Iran’s capital market?
The standard settlement cycle for brokerage transactions are as chart below:
|Type of securities||Settlement time|
|Subscription rights of stocks||T+2|
|Fixed Income Bonds||T+1|
|Mixed transaction Fund||T+2|
|Power Parallel Salam in Iran Energy Exchange (IRENEX)||T+3|
|Commodity Depository Receipt(CDR): Gold||T+1|
Commodity Depository Receipt(CDR):
All types of listed products except Gold
|Standard parallel Salam contract in Iran Energy Exchange (IRENEX)||T+1|
|Standard parallel Salam contract in Iran Mercantile Exchange (IME)||T+1|
|Iran Energy Exchange (IRENEX)Physical market in the domestic ring||T+3|
|Iran Energy Exchange (IRENEX)Physical market in the international ring||T+5|
|Housing Mortgage Rights (HMR)||T+3|
What is the type of currency to invest and pay in Iran’s capital market?
Iranian Rials (IRR) is the currency that is used in Iran’s capital market.
Exchange rate is available in https://cbi.ir/ExRates/rates_en.aspx
How can I enter the money and repatriate?
Please refer to Article 10 of "the Regulation Governing Foreign Investment":
- The foreign or Iranian nationalities/entities shall, by obtaining the trading license, be authorized to open accounts in Rials, in foreign exchanges, transfer foreign currencies to Iran, and convert them into Rials and vice versa in the Iranian banks for their banking and investing operations. Transfer of the original capital, capital gains and cash dividends received by the persons/ entities holding trading licenses overseas (outside Iran) shall be authorized in compliance with the national foreign exchange rules and other relevant standards and regulations. The Central Bank of I.R.I (CBI) shall deliver the foreign exchange equivalent of the transferable funds as described in Note 1 of this article to the foreign investor or the Iranian investor holding licenses at the official exchange rate in the national banking system in case of a single currency peg or otherwise, at the floating exchange rate. Under particular circumstances and at the discretion exercised by the Central Bank of I.R.I., such funds shall be payable in equal installments at a four month interval during the course of one year. The necessary guidelines for implementation of this article shall, within three months as of the approval date of the present regulations, be approved by the Ministry of Economic Affairs and Finance and the Central Bank of I.R.I.
How do I get my/my clients’ portfolio, which I have already requested for, from the relevant office?
You can get your/your client's asset statement and stock turnover by giving in identification certificates (passport)/power of attorney and referring to CSDI or by receiving your username and the link sent by CSDI which you can download your portfolio from, you can get your requested portfolios directly and with no need to refer to CSDI in person (via IPS).
What is IPS?
Investor Portfolio System (IPS) is a certain electronic service to the capital market practitioners that shareholders can get their latest status of assets and the data related to their supervising brokers in each symbol right after they receive its user-name.
For more information, please refer to https://enp.csdiran.com/
How can I get my dividend?
You can get your dividend in three ways:
• Declaring your SHEBA number (via Melli Bank of Iran) by referring to your broker in person.
• Referring to CSDI.
• Contracting issuers with CSDI.
What are Clearing and Settlement Systems?
Multi-currency Netclear (McNc)
Netclear is the multi-currency clearing and reporting system of CSDI which generates and provides electronic reports for beneficiaries imported from the post-trade system in the capital market.
• NC-Main Sub-system
Daily trades of TSE, IFB, IEE and IME exchanges are imported to NC-Main for clearance. These data are fetched from the CSDI’s post-trade system.
• NC-Web Sub-system
Beneficiaries; especially brokers can login to Netclear website at www.csdireports.com and receiving specialized reports.
• CertReporter application
Cert Reporter creates electronic certificate for issuers to replace the paper ones. The software facilitates preparation of certificates and provides services such as searching, filtering and printing.
• BrokerReporter application
Broker reporter is a windows application which generates buy/sell declarations and certificates for brokers.
• CertDistro sub-system
Distribution of customers’ online certificates is done by this system.
This system is provided for electronic clearing and settlement in combined markets, Kish market, energy exchange, etc. This system eliminates paper work and provides electronic bank payments (clearing and group payments). Furthermore, the system provides the service to banks in order to know about the status of brokers’ accounts.
Settlement Guaranty Fund (SGF)
SGF has designed to manage brokers’ risk of default and its fund. The main purpose of SGF is to guarantee the obligations of the two trading parties against each other. This system involves the calculation of resources and the contribution of members to the Guarantee Fund and recording and reporting of defaults. This system has information exchange with other systems like Netclear. The system is accessible through internal URL.
For more information, please refer to: http://en.csdiran.com/pages?page=English/Services/SGF
Future Post Trade System (FPTS)
The main purpose of FPTS is to automate the operations of post-trades of futures market.
What are the risk management actions in CSDI?
Risk Management: Responsible for taking care of post-trade-related tasks, CSDI plays a significant role in managing systemic risk. To this purpose, CSDI has designed and launched the services bellow towards managing the risks related to the clearing house:
• Settlement Guarantee Fund (SGF)
• Asking for collateral from clearing house participants
• Margin on futures contracts
• Freezing account for credit purchases
• Appling Credit Limits for brokers
• Adopting T+2 Settlement Cycle
What are the Corporate Actions in CSDI?
Corporate Actions: According to article 37 of “Tehran Stock Exchange-Regulation on Listing the Securities”, dividend distribution, capital increase, mergers and acquisitions are some of services carried out in CSDI.
For more information, please refer to: http://tse.ir/cms/Portals/0/int/Listing%20Requirements%20at%20TSE.pdf
• Benefit Distribution: Since CSDI has all the information regarding securities, as well as Sukuk, Certificates of Deposit, and other fixed income securities, benefit distribution is made solely by this company.
• Capital Increase: Since CSDI has all the information of share beneficiaries (investors), it centrally starts to underwrite the capital increase of the issuers’ preemption rights which has devolved the issues in question upon CSDI. After the capital raise verification by the supervisory body, SEO, CSDI begin to do the act of raising the capital on shareholders’ capital in the form of bonus issue or preemption right. Mixing the capital increase in the form of the underwriting preemption is among the acts CSDI does in this regard.
• Pledging Securities: We at CSDI provide services to guarantee the obligations or the repayment of the loan received by the pledger (the owner of pledged securities) and given by the security – receiver (the person in favor of whom the securities are pledged) which is in fact reliable banks and financial institutions. Releasing the properties in question after meeting the obligations or selling the pledged assets usually occurs after the process of pledging.
For more information, please refer to: http://en.csdiran.com/pages?page=English/Services/PledgingSecurities
• Legal Transfer of Securities: Since CSDI is responsible for safekeeping the securities, in case of issuing a confiscation order by legal authorities, the aforesaid securities will be seized by the company until the time of final verdict. Another trial operation done by the CSDI belongs to deceased investors. In case of death of a shareholder, its financial assets will be transferred to his/her heirs through electronic means.
• Information Editing: Information editing is an action which is being done in order to remove any discrepancy between shareholders’ profiles in the computer system and their identification or their corporate identities for corporate shareholders.
What are value Added Services?
This system is used to inform brokers of latest portfolio and supervising broker changes of their customers.
This system is provided to integrate and facilitate e-services for brokers.
Dara system is an electronic portal for investors and aims to integrate e-services provided for investors. (IPS is one of Dara subsystems mentioned before)
Dana provides electronic services and information for issuers.
• Corporate Data Gathering (CDG)
This product is a Windows application used to validate shareholder's information sent by issuers and brokers to CSD for acquiring account or share allocation.
Danesh is designed to facilitate the processes like collateral management, profit distribution, etc.
• Comprehensive information gathering system (CIGS)
It is a comprehensive customer information registration system to computerize and automate the process of collecting and managing customer information.
Executive Directive of Regulations Governing Foreign Investment in Iranian Exchanges and OTC Markets
In the execution of Article 13 of Regulations Governing Foreign Investment in the Iranian Exchanges and OTC Markets of the Islamic Republic of Iran approved by the High Council of the Securities and Exchange of Iran on April 18, 2010, subject to the Decree number 42459/t/17792 of the Cabinet Ministers,
Article 1: The terms and expressions in the present regulations have the same Definition as per in the Securities Market Act approved in November 2005 as well as in the Regulations Governing Foreign Investment in the Exchanges and OTC Markets of the Islamic Republic of Iran approved by the Cabinet on April 18, 2010. Other expressions defined as follows:
Foreign Investment Bylaw: The Bylaw Governing Foreign Investment in the Exchanges and OTC Markets of the Islamic Republic of Iran approved on April 18, 2010, enacted by the Cabinet Ministers.
Closing Price: Means the price announced by exchanges and OTC markets as the closing price of a given security at the end of the trading day.
Trade License: Means a trade code issued by the Central Securities Depository of Iran for conducting trade at the Iranian capital market.
Article 2: Every foreign entity or any Iranian national owning assets with foreign origins who applies for a trading license shall have to submit the following documents and information to the Central Securities Depository of Iran:
a- Forms required to obtain the trading license,
b- The following identification documents:
b-1- In case the applicant is a natural person:
The original and copy of ID Certificate (Birth Certificate) or passport of Iranian nationals owning assets with the foreign origin and the original and copy of passport.
b-2: In case the applicant is a legal entity:
· The original and copy of Certificate of Incorporation, the Articles of Association or any similar document that illustrates the particulars, specifications, and authorities of the authorized signatory legal persons.
Note 1: The documents referred to in paragraph b of this article shall be provided in Persian or English. If the original document is in another language, it is sufficient to translate it into Persian or English, provided that the translation has been certified by the official translation authorities in Iran, the country of residence of the applicant or the country of issue.
Note 2: If the certified copy of the document referred to in paragraph (b) of this article has been produced by the following competent authorities, the presentation of the original shall not be necessary:
(a) Brokerage firms licensed by the Securities and Exchange Organization of Iran,
(b) The notary public offices licensed by the Judiciary of the Islamic Republic of Iran,
(c) Embassy or the Consulate of the Islamic Republic of Iran in the applicant's place of residence,
(d) The competent authorities designated for this purpose in the applicant's country of residence or the place of issue.
Article 3: The Central Securities Depository of Iran shall, within a maximum of seven working days after the full submission of the application, the documents and information referred to in Article 2, issue the trade license and deliver it directly or through financial institutions, exchanges or OTC markets to the applicant.
Article 4: Exchanges, OTC Markets, and Central Securities Depository of Iran shall adjust their systems in such a way as to observe the limits illustrated in provisions of Articles 7 and 8 of the Regulations Governing Foreign Investment in the Iranian Exchanges and OTC Markets.
Note: Until the necessary systems are in place to record transactions of investment fund units with the Central Securities Depository of Iran, the observation of the aforementioned units is laid on the investment funds managers.
Article 5: All transferable funds subject to Note 1, Article 10 of Foreign Investment ByLaw, at the request of a foreign investor or an Iranian investor with related trade permit or their agent, shall be calculated by Central Securities Depository of Iran according to the following formula and enclosed as a confirmation letter with validity of 60 days from date of issue, shall be notified to the Organization for investment economic and technical assistance of Iran (OIETAI).
B= The value of the securities of a foreign investor or an Iranian investor with a trading license that was owned up to 365 days prior to the date of submission of the application, at the closing prices on the date of submission of the application;
Nbi = Volume of securities purchased by a foreign investor or an Iranian investor with a trading license during the period of 365 days leading to the date of application;
b = Stands for buy (purchase)
Tbi = Number of days between the date of securities purchase and the date of application;
Nsi = Volume of securities of type (i) sold by a foreign investor or a licensed Iranian investor within the time period of 365 days leading to the date of application;
S= Stands for Sell (Sale)
Tsi = Number of days between the sale date of securities (i) and the date of application;
Pi: Securities i's closing price on the date of application;
n = Number of securities traded by a foreign investor or a licensed Iranian investor during the 365 day period leading to the date of application
DIV = amount of cash dividends received by a foreign investor or a licensed Iranian investor through investment in securities in the period of 365 days leading to the date of application;
∑ = Summation sign
Note 1: In calculation of transferable funds, the maturity of securities is taken into account as the sale on maturity date and the nominal price is used instead of closing price of the securities on the date of application.
Note 2: The preemption right or the equities arising from the capital increase shall be considered as equivalent to the purchase of equity from the date of announcement of the decisions taken by the extraordinary general assembly of owners of stocks to increase the capital, as reported and announced at the CODAL system.
Note 3: Issuance and cancellation of investment fund units shall be considered as equivalent to buy and sell. For these securities, the closing price will be considered as the net worth of the investment units.
Article 6: In order to prove the foreign origin of the assets owned by the Iranian individual who has received the trading license, delivery of the certificate issued by the related Iranian bank or credit institution in which the account(s) are opened suffices, in case that the certificate states that the assets are in foreign currency (or in rial) and are deposited from a bank branch outside Iran into one of the following bank accounts:
Paragraph 1: An account in a bank or credit institution licensed by the Central Bank of Iran opened in the name of the Iranian individual who received the trading license.
Paragraph 2: An account in a bank or credit institution licensed by the Central Bank opened in the name of a financial institution chosen by an Iranian national with the trading license as the broker to deal securities transactions,
Paragraph 3: A bank account at a bank or credit institution licensed by the Central Bank of Iran opened on behalf of an Iranian person's representative, selected by him to conduct securities transactions.
Note 1: Upon the request of a licensed Iranian trader and the delivery of the certificate subject to this very article, the Securities and Exchange Organization of Iran shall, upon verification of the certificate, register and confirm the transferred amount of assets owned by the licensed Iranian individual into the country of Iran as an asset with foreign origin in accordance with the bank's certificate. The organization's confirmation document must include the particulars of the Iranian national holding the trading license, the amount of foreign currency transferred to Iran, the type of currency and the date of transfer. This confirmation means that the foreign source of assets has been substantiated and will not be subject to further examination at the time when the assets are being transferred out of the country in the form of foreign currency.
Note 2: To prove the foreign origin of assets owned by an Iranian person who has obtained a trading license, presentation of related certificates on the entry of foreign currencies into the country, subject to paragraph (a) of Article 21 of the Executive Law on Promotion and Support of Foreign Investment, is also acceptable.
Article 7: Except for tradable securities at exchanges and OTC markets in which foreign investment is subject to the foreign investment by-law, the acquisition and trade of other securities, such as Sukuk, corporate bonds, bank deposit certificates by foreign entities are allowed without restriction upon obtaining the trading license.
Note: The ownership of investment fund units is also subject to the limits outlined in the Foreign Investment By-Law.
Article 8: The person who receives the trading license is supposed to provide the Securities and Exchanges Organization of Iran, exchanges, OTC markets or other bodies determined by SEO to perform its legal duties, with the necessary information and documents within the deadline set by them.
Note: The Securities and Exchanges Organization of Iran and other authorities subject to this Article shall treat the information, documents, or certificates obtained from holders of trading license as confidential and shall not disclose to anyone other than lawyers, auditors or inspectors or publicly release except for the following:
(1)- In case of obtaining written consent trading license in advance for their publication or delivery to others;
(2) If the information is publicly disclosed or provided collectively in such a way that it is not possible to trace or detect information relevant to any single person;
(3) Where their public release is mandated by specific authorities, including the SEO and legal authorities, in accordance with related laws and regulations.
Article 9: In case that a given holder of trade license violates the Regulations of Foreign Investment, the Executive guidelines governing such regulations and other capital market regulations, the Securities and Exchanges Organization of Iran may impose a ban on the foreign investor's trading code issued for the purchase of securities "until the final verdict of related legal bodies". In that case, the investor can only sell the securities, which he/she bought in their own.
This instrument is approved by the SEO High Council on October 3, 2011, in 8 articles and 8 notes and was amended on July 16, 2019, by the same authority in 9 Articles 13 notes.
Which party is responsible for setting Credit Limits? Is it the stock exchange or the depository?
Central Securities Depository of Iran (CSDI) which acts under the supervision of Securities and Exchange Organization is considered as the sole body bearing the right to set or update credit limits for brokerages.
Are the updates of traders' daily Credit limits being changed during trading sessions (live) or at the end of the trading session?
Brokers' credit limits are calculated on a daily basis, and brokers receive their credit limit reports before the market opening. However, in case that brokers seek an increase in their credit limit during mid-day trading, they file a request with CSDI. Upon receiving the application, CSDI corresponds with two exchanges, i.e Tehran Stock Exchange (TSE), Iran FaraBourse (IFB), as well as the Securities and Exchange Organization (SEO) and brief them about the request. Based on the broker's application to increase its credit limit for potential trades, either the TSE or IFB consults with Tehran Securities Exchange Technology Management Co (TSETMC). And, ultimately, when TSETMC received the green light from the SEO, which has the final say in the matter, the new credit limit would is set, otherwise, the request turns null.
In case that traders reach their credit limits during a trading session, will they be able to increase their credit limit for the same trading session? If yes, which party is authorized to increase traders' credit limits (stock exchange or depository)? And what are the guarantees traders have to submit?
Yes, In case that brokers apply for an increase in their credit limit with CSDI during the trading session, CSDI obligates the brokerage to either deposit money equivalent to the requested amount in their CSDI account or provide a corresponding bank guarantee. In the wake of the provision of required guarantees, CSDI notifies in its letter to SEO, TSE, and IFB about the request and details on the provided guarantees, and asks for the decision by CSDI. In general, CSDI is responsible for suggesting and implementing changes in brokerages' credit limit under the supervision of Securities and Exchanges Organization, based on the information received from the Securities and Exchange Brokerage Association and SEO which includes broker houses' ratings, their record to avoid derogatory marks on credit reports, their level of income, and number of shareholders, among others. Similarly, in order to qualify themselves for a favorable update on their credit limit, brokerages are also supposed to stick to credit building measures like on-time payments, avoiding derogatory marks, increasing their income, and the number of their shareholders as well as, lowering their Debt-to-Income Ratio.