Economy, Business And Markets
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The Munich Way Forward

The chief deterrent to foreign investment is insider trading—the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information
Jochen Thiel, managing director of Munich Stock Exchange Jochen Thiel, managing director of Munich Stock Exchange

Iranian exchanges need a major overhaul to attract foreign investors, as the systems running Iran’s exchanges are “antique” compared to other advanced markets, Jochen Thiel, managing director of Munich Stock Exchange, said about Iran.

Thiel has visited Tehran a few times since Iran made headway in its negotiations with the P5+1—Britain, France, China, Russia and the United States, plus Germany—over its nuclear energy program.

Our sister publication Donya-e-Eqtesad sat down with Thiel to know his views about Iran’s securities exchange and how they should change to accommodate foreign investment.

As the negotiations of President Hassan Rouhani’s administration with world powers neared fruition in 2015, officials hoped for a boom in foreign investment. The negotiators reached a deal that went into effect in January. However, foreign investment and involvement have disappointed expectations.

Foreigners are shy for a multitude of political and economic reasons, but that gives securities market authorities time to adjust Iranian markets for attracting foreign capital.

Thiel believes the chief deterrent to foreign investment is insider trading—the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information. It should be eradicated.

“For a foreign investor, nothing is more worrying than knowing that trades on an exchange are based on inside information,” he said.

The head of Munich Stock Exchange said foreign investors are keeping away from stock markets in Persian Gulf peripheral nations, precisely because of this.

The participation and interest of retail investors in Iran are more than it is in Germany in Thiel’s view, which could be capitalized by offering them better trading tools.

“Regrettably in Iran, the market has not been developed for retail investors. It would be a good idea to extend trading hours from their current three and a half hours,” he said.

Trading hours start from 8 a.m. to 10:00 p.m. in Germany. These long hours were chosen to create an overlap in trading with other major markets in Asia and North America.

“The SEO should give more leeway to brokerages for them to develop better trading platforms and tools for retail investors,” he said, arguing that this could have a spillover effect to services offered to institutions as well.

“However, a vigilant watch must be kept on their activities while they are allowed to innovate.”

Thiel also said the SEO should do more to bridge the gap between mainstream financial contracts and Islamic laws to offer a wider array of products for trading on Iranian exchanges.

Munich’s exchange is home to approximately 14,000 German and international stocks, annuity bonds and funds. It guarantees its clients’ first-rate handling of its securities from over 60 countries.

“Iranian exchanges should be given room to maneuver and compete. Their infrastructures and product lists need serious updates, if they aspire to attract investors that are used to the world class services offered by the likes of Munich Stock Exchange,” Thiel concluded.

Financialtribune.com