Iran’s Capital Market Review
The origins of the stock exchange in Iran go back to 1936 when Bank Melli of Iran issued a report, detailing a plan for an operational stock exchange in Iran with the help of Belgian experts. The Tehran Stock Exchange, abbreviated as “TSE”, was inaugurated in 1967, and dealt only in bonds issued by government and companies. After the Islamic Revolution in 1979 the circumstances completely changed and the banking system underwent major restructuring .
Some laws were passed in banning financial institutions from paying interest on deposit accounts in compliance with sharia a law and thus an Islamic banking system was introduced.
The eight-year war with Iraq put an enormous strain on Iran’s resources but after it ended the Tehran Stock Exchange took on a new lease of life with the Budget Act in 1988 and in consequence the number of listed companies rose to 249 thereafter .
A new automated system of trading came to existence over a four- year period between 1996 to 2000 and it culminated in the establishment of new methods of regulating transactions in the stock market.
Parliament, in December 2006, passed the “Capital Market Law” to enable the establishment of a modern securities underwriting system in the market. The restructuring of the capital markets was carried out to meet its new needs and establish the Securities and Exchange Organization (SEO) as a separate entity to supervise and regulate the TSE and the other exchanges forming part of Iran’s capital markets .
The TSE also underwent legal changes and reorganized as a public joint stock company with over six thousand shareholders at the time.
A major innovation was the establishment of new institutions in the capital markets such as investment banks, advisory companies and mutual funds. All these now play a vital role in financing projects and supporting entrepreneurs.