Economy, Business And Markets

Is Domestic Capital Market Ready for Nuclear Deal?

Analyst at Securities & Exchange Organization
Is Domestic Capital Market Ready for Nuclear Deal?
Is Domestic Capital Market Ready for Nuclear Deal?

Optimism about reaching a final nuclear agreement has helped markets rally and benchmarks to cross challenging resistance lines.

As Iran and world powers are racing against the clock to clinch the deal, the domestic capital market, as a benchmark for economic progress and accomplishments, is said to be among the first destinations for foreign investments. Although considered emerging and potent, Iran’s capital market has long suffered from the absence of certain financial instruments and deficiency of market infrastructure.

To resolve these shortages, authorities have taken pertinent steps over the past couple of years, among which the launching of Iran Mercantile Exchange and Energy Exchange, and securities such as embedded put options and housing loan preemptive rights are noteworthy.

Moreover, a new post-trading clearance system is to be implemented to help integration of asset allocation process. Chairman of Securities and Exchange Organization of Iran Mohamad Fetanat, recently announced currency and cooperative exchanges will be launched soon as well.

However, every new advancement needs a set of prerequisites for the groundwork to be laid properly.

Currently, the domestic market’s infrastructure and microstructure are obsolete and incomprehensive. The trading system and its core were designed by a French company in 1992. However, system support and maintenance were terminated after the West imposed sanctions against Iran in 2011 over its nuclear energy program.

Since then, Tehran Stock Exchange Technology Management Company has faced a great deal of hardship and pressure to integrate new instruments into the system.

However the derivative trading system has not yet been included and there are still a limited number of companies capable of providing such a system.

Hopefully, if sanctions are lifted, it is highly probable that NASDAQ – the most elaborate and common trading system–will be purchased, which would revolutionize the way domestic markets perform.

While many are eying a nuclear deal, it remains to be seen how the market is going to host the long line of foreign investors waiting to tap into Iran’s much-heralded capital market.