Covering the risk of volatilities in the forex market is crucial to economic development, Hamed Soltaninejad head of Iran Mercantile Exchange said in a meeting with the Iran Institutional Investors Association. He added that establishing a foreign exchange derivatives market can help improve the other financial markets while making financing easier and more efficient. It could also help reduce the risk of trade for importers and exporters.
There is a direct correlation between a country’s level of economic development and the extent to which its financial markets are developed. He pointed to South Korea’s experience of creating a foreign exchange derivatives market saying that it introduced its securities to the world through this mechanism.
“The Mercantile Exchange provided us with good information about derivatives markets during the past eight years and also helped us launch the gold coins derivatives market. Similarities between the forex and gold coin markets would help us in establishing a foreign exchange derivatives market.”
Last week, the Central Bank of Iran approved the launching of a foreign exchange derivatives bourse under SEO supervision. The move is expected to hedge against fluctuations in foreign exchange rates through a variety of instruments, namely futures and options contracts.
The head of IME stressed the importance of attracting foreign direct investment for achieving the desired 8% yearly growth. He added that the ground should be prepared for encouraging foreign businesses to enter Iran’s markets. “We have to reform our economic structures and create markets that work based on international economic frameworks in order to gain the trust of foreign investors.”
