The Majlis has allowed the government to allocate a maximum 5% of its earnings from divesting shares in the bourse to market makers.
The decision was made in an amendment to the 2021-22 fiscal budget bill to improve liquidity of stocks, according to IRNA, the state news agency.
Reimbursements must be made after approval from the Economy Ministry and as per policy set by the High Council of Securities and Exchange.
Market makers gained increased traction in recent months after share prices fell to unprecedented lows in summer.
With shareholders unable to cash their shares as sell side pressure mounted, the regulator resorted to market makers to help improve the liquidity of shares.
Market makers essentially act as wholesalers by buying and selling securities to balance the market—the prices they set reflect market supply and demand. Market makers help keep the market functioning, meaning if investors want to sell a particular security, they are there to buy it. Similarly, if they want to buy a stock, they're there to have that stock available.
In the next budget the government has projected higher income from selling shares in state companies. As per the proposed budget, it expects to generate 950 trillion rials ($3.8 billion) from selling assets in state companies. This is almost eight times the 115 trillion rials ($460 million) forecast in this year’s budget.
Data released by the Plan and Budget Organization show the Rouhani administration earned 170 trillion rials ($570m) from share sales in the first five months of current fiscal year that ends on March 20. The earnings were far beyond projection for the whole year and were realized during the bullish phase of the stock market.
The government also generated 130 trillion rials ($520m) in October via selling a portion of its stake in four refineries via an exchange-trade fund.
Following meteoric gains since the beginning of the current fiscal year, Tehran’s stock market went into a deep correction phase in early August.
The government has tried to prop up the market sporadically by requiring institutional buyers and investment funds to boost demand. But the efforts were in vain and failed to persuade the deluge of neophyte investors, anxious to protect their assets from further decline, to leave the sell side.
