The Securities and Exchange Organization has announced new guidelines raising the minimum capital of financial institutions operating in the capital market.
This was communicated to investment banks, market makers, financial consultants and financial data processing companies by the SEO’s Department for Supervising Financial Institutions.
Accordingly, the minimum capital for investment banks must not be less than 10 trillion rials ($35 million), the Securities and Exchange News Agency (SENA) reported.
The floor for financial consulting firms is 80 billion rials ($287,750) and for financial data processing companies 60 billion rials ($209,000).
The minimum for market making funds is 100 billion rials. A market maker is one who buys and sells large amounts of a particular asset in order to facilitate liquidity and ensure the smooth running of financial markets.
Financial institutions whose capital is less than the minimum are required to fully comply by the new requirement by July 2023 and meet at least half the amount by Sept 2022.
The SEO said the need for higher levels of capital is driven by the fact that the present amounts are simply not enough to cover risks and accommodate the financial needs of capital market given the pattern of rising prices in recent months.
The stock market regulator said Tuesday that it has expedited issuing permits to set up financial firms in line with efforts to restore stability to the teetering share market.
Based on SENA reports, the SEO issued 25 permits for new investment funds since the beginning of the fiscal year (in March) up to now, six of which were issued last month.
Likewise, the regulator has issued agreements in principle to establish 8 investment holding companies in the past eight months.
To improve the liquidity flow, the SEO said it is positive about increasing the number of market making funds. There are presently about 50 market making companies in the stock market with 15 having agreements in principle.
Market making gained traction when Iran's equity market took a drubbing in the summer of 2020 after historic gains in a short period.
The SEO says market makers now manage 920 trillion rials ($3.2 billion), which is 44% higher than last December.
