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Tehran Stock Exchange
بورس اوراق بهادار تهران
Type Stock Exchange
Location Tehran, Iran
Founded 1968

The Tehran Stock Exchange (TSE) (Persian: بورس اوراق بهادار تهران) is Iran's largest stock exchange, which first opened in April 1968. The TSE is based in Tehran. As of June 2008, 400 companies, with a market capitalization of US$70 billion were listed on TSE.[1] TSE which is a full member of the World Federation of Exchanges and a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of the world's best performing stock exchanges in recent years.[2][3]


Gun-metal relief discovered in Lorestan province, among the Achaemedian dynasty's (550-330 BC) antiquities. Featuring four men, hands in hands, indicating unity and cooperation; standing inside circles of the globe, which is itself, according to Iranian ancient myths, put on the back of two cows, symbols of intelligence and prosperity.[4]


The concept of a stock industrialization dates back to 1936 in Iran with the largest and oldest bank in Iran, Bank Melli together with Belgian experts wrote a report detailing the prospects of having an operational stock exchange in Iran. Outbreak of the World War II and other political factors delayed the implementation process until 1967 where the Government revisited the issue and ratified the "Stock Exchange Act". Consequently a small exchange, the Tehran Stock Exchange (the "TSE") began its operations in 1967. What followed was an initial trading in corporate and government bonds. The economic boom in the 1970s led to a pent-up demand for equity. Meanwhile, certain forces were changing the economic backdrop in Iran. The Government was actively involved in grant of shares to employees for large state-owned and family-owned enterprises. Market activity was reaching a frenzy with many companies and high net worth individuals vying to participate in the new found wealth associated with the TSE.

Everything came to a stand still after the Islamic Revolution leading in a prohibition against interest-based activities and nationalization of major banks and industrial giants. Mobilization of all resources towards the war effort during the 8-year Iran-Iraq war did not help matters. However, the Government fully embraced economic reforms and a privatization initiative in 1989 with a surge of activity in share activity of many state-owned companies through the defined targets in the first "Five-Year Economic Reform" where the Government together with the Parliament defined the economic prospects of the country for the coming five years. Attention to promotion of the private sector and new interest in the TSE brought life back to the market. However, lack of regulation and out-of-date legal framework led to crisis in the market leading to certain "meltdowns" until today. The market has experienced its share of highs and lows in the past years including topping the World Federation of Exchanges' list in terms of performance in 2004 to tumbling down to last place in 2007 due to political uncertainties in the region.


  • The Securities & Exchange Council is the highest authority and is responsible for all related policies, market strategies, and supervision of the market. The Chairman of the Council will be the Minister of Economics; other members are: Minister of Trades, Governor of the Central Bank of Iran, Managing Director of the Chamber of Commerce, Attorney General, Chairman of the Securities and Exchange Organization, representatives of the active market associations, three financial experts requested by the Economics Minister and approved by the Council of Ministers, and one representative for each commodity exchange.
  • The Securities and Exchange Organization (SEO) are responsible for administration and supervisory duties, governed by the Board of Directors. The SEO’s Board of Directors are elected by the Securities and Exchange Council.


The TSE is open for trading five days a week from Saturday to Wednesday, excluding public holidays. Trading takes place through the Automated Trade Execution System from 9am to 12:30am, which is integrated with a clearing, settlement, depository and registry system. The TSE is solely an order-driven market and all transactions are executed in the manner and under the principles of open auction.
The trading system is an order driven system, which matches buying and selling orders of the investors. Investors can place their orders with TSE accredited brokers, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements. The mechanism for which the price of equities is determined is as follows:[5]

  • ''The best price (price priority)
  • Time of order priority''

Under the price priority rule, a selling (buying) order with the lowest (highest) price takes precedence. Under the time priority rule, an earlier order takes precedence over others at the same price. Thus, when the lowest sell and the highest buy orders match in price, the transaction is executed at the price. In short, the TSE market is a pure order- driven Market.[5]

The trading system also generates and displays details of current and historical trading activity, including prices, volumes traded and outstanding buy and sell orders. This ensures that investors have the required information to be able to take informed investment decisions. The range of price movements is typically restricted to two per cent daily. This can be changed in specific situation by the Board of the TSE in case of unusual price movements resulting in an extremely high or low P/E ratio. Short selling is not permitted. There are no minimum trading lots.[5]

The TSE seeks to install the new trading system which will be purchased from Atos Euronext Market Solutions (AEMS) during second quarter of 2007.

Presently, TSE trades mainly in securities offered by listed companies. Equities and Corporate Bonds are being traded at TSE at the moment. The plan is to introduce other financial instruments in the near future. The introduction of project-based participation certificates that bear a fixed annual return during the period of the project and promise the final settlement of the profit at the date of its completion, has diversified the market.[5]

The Tehran Stock Exchange (TSE) has started an ambitious modernization program aimed at increasing market transparency and attracting more domestic and foreign investors. Concrete measures that have been taken in the planning and operations of the stock exchange such as the settlement system, geographical expansion, new exchange laws in order to attract local and foreign capital.

The new system makes it possible to purchase and sell stocks on the same day. The system has also made it possible for 2,000 brokerage stations to work simultaneously, while the number was just about 480 in the past. The rise in electronic dealing, non-stop input and updated data on orders, transactions and indices are among other features of the new system. The new system has made it possible to link the stock market to the international bourses. The bourse can now handle 700 transactions per second and 150,000 transactions per day.[6] TSE experienced an 11% growth at the end of 2008 and ranked second in the world in terms of increase in the volume of trade after Luxembourg’s Bourse.[7]

TSE is a full member of the World Federation of Exchanges (the former Fédération Internationale des Bourses de Valeurs or FIBV) and a founding member of Federation of Euro-Asian Stock Exchanges (FEAS).[5]


OTC market

Since 2009, Iran has been developing an over-the-counter (OTC) market for bonds and equities. Its shareholders include the Tehran Stock Exchange Corporation (20%), several banks, insurance companies and other financial institutions (60%), and private and institutional shareholders (20%).

Economic sectors

As of April 2007, there are 324 companies listed on the TSE with a total market capitalization of US$42,452.5mn. Close to 60% of the market capitalization relates to listed companies from the Basic Metals Sector, Motor Vehicles and Trailers Sector, Chemicals and By-Products Sector, and Non-Metallic Minerals Products Sector. A combined total of 161 companies from the said sectors are listed on the TSE , which translates to 49.7% of total companies listed on the TSE. Largest stocks include Mobarakeh Steel Co. with a market capitalization of US$3,218mn, which translates to 7.6% of total market capitalization, National Iranian Copper Industries Company (Sanaye Mese Iran) which represents 6.8% of total market capitalization, and Saipa Co. at 5.3% of total market capitalization. This indicates that the capital market in Tehran is heavily concentrated on four economic sectors with companies that make up nearly half of the total listed companies on the exchange. While 163 companies listed are spread out amongst 26 sectors, with the Food and Beverages Sector alone accounts to 32 companies at a market capitalization of US$897.5mn.[8]

In 2008, other companies in the top spots included Gol-Gohar Iron Ore Company ($2.1 billion) and Chadormalu Mining and Industrial Company (two billion dollars). Meanwhile, value of shares of Kharg Petrochemical Company, Ghadir petrochemical companies, Khuzestan Steel Company, Power Plant Projects Management Company (MAPNA), Retirement Investment Firm, Iran Khodro Industrial Group and Metal and Mine Investment Companies exceeded one billion dollars.[9] Studies show that about 30 firms, involved in 11 industries, hold close to 75 percent of shares in Tehran Stock Exchange (2008).[10]


In recent years, the role of the private sector has been further on the increase. Furthermore, an amendment of the article 44 of the Iranian Constitution in 2004 has allowed 80% of state assets to be privatized, 40% of which will be conducted through the "Justice Shares" scheme and the rest through the Bourse Organization. The government will keep the title of the remaining 20%.[11][12]

Under the privatization plan, 47 oil and gas companies (including PetroIran and North Drilling Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange by 2014. [13]

Market participants

The Government of Iran directly holds 35 percent of the TSE, while securing another 40 percent through pension funds and investment companies such as Ghadir Investment Company or Social Security Investment Company, one of the largest institutional investors on the TSE. Foreign investment accounts for only about 2 percent of the stock market (2009).[14]


• TSE All Share Price Index (TEPIX)
• Industrial Index
• Financial Index
• TSE Dividend & Price Index (TEDPIX)
• TSE Dividend Index (TEDIX)
• TSE-50

In 1990, the All-Shares Price Index (TEPIX) was introduced to the market as the main indicator of share price movements.TEPIX is a weighted market value of all share prices appearing on the TSE Board and is measured every two minutes. In addition to the TEPIX, daily price indices of shares of each company, each sector, and the Top Fifty most active companies (TSE-50) are computed.


As of June 2008, 400 companies, with a market capitalization of $70 billion were listed on the TSE.[15]

2000-2004: The performance of the TSE has had no correlation with major exchanges or emerging stock markets over the past few years and not even with the oil price.[16][17] While the overall indices of the world’s five major exchanges – New York, London, Paris, Frankfurt and Tokyo plunged by 40 to 70% between March 2001 and April 2003, the TSE index (Tepix) bucked the trend by going up nearly 80%.[18]

2005-2006: In December, 2005, 419 companies with a market capitalization of IRR 32,741.7 million were listed in TSE. The TSE has had an exceptional performance over the past 5 years. In general, the stock market in 2005/06 shed value as it is manifested by the decline of its major stock price indices. The TSE price index (TSPIX) at the end of 2005/06, declined by 21.9%, while the Financial Sector Index, and the Industrial Index, declined by, 38.8%, 19.4% respectively, and the Dividend Index gained 11.8%, mostly due to a reported 100 billion USD capital flight from the country because of the international dispute surrounding the Iranian nuclear programme.[19]

2007: The market bottomed in June 2007 mainly because of the renewed privatization drive in the Iranian economy.[20][21][22]

2008: The TSE was not directly affected by the international financial turmoil in 2008, but following the global reduction in prices of copper and steel, the bourse index dropped by 12.5 percent, as most of the companies listed on the exchange are producers of such commodities.[23][24]

2009: The TSE sank about 40% in value between August 2008 and March 2009, influenced by falling oil prices and declining markets in other parts of the world. As of August 1, 2009 it has recovered by more than 10%.[25]


Cash dividends are taxed 22.5% at source.[5]

The Tax Amendment has changed the regulations regarding calculation of tax on transfer of shares and their rights in Iranian corporate entities. In the case of shares listed on the Tehran Stock Exchange (TSE) the tax on transfer of such shares and other rights is 0.5 per cent of the sales price. No other taxes are payable (i.e. tax on capital gain or interest income).[5]

In the case of transfer of the shares and their rights to other corporate entities (i.e. those not listed on the TSE) a flat rate of four per cent of value of the shares and rights transferred applies. No other taxes will be charged. The Amendment has removed the requirement to value the shares in this category.

Growth potential

So far, the Tedpix index has been driven by domestic investors, including wealthy Iranians, public sector pension funds and the investment arms of state-owned banks. For the index to prosper in the long run, more foreign investors need to make significant share purchases.[26]

The market, with a capitalisation of $37 billion, is trading at a fraction of the earnings multiples enjoyed by Iran's neighbours, while average earnings continue to grow at about 25 per cent a year (2007). According to experts, the economy of Iran has many investment opportunities, particularly on its stock exchange.[27]

Future outlook

Foreign portfolio investment

The new by-law for Foreign Portfolio Investment (FPI) was approved by the government in June 2005. Under this new bylaw, foreign investors can participate in the TSE for the first time. Initially, however, some limitations have been imposed on foreign investors:

  • Foreign investors may own a maximum of 10 percent of each listed company.
  • Foreign investors may not withdraw their main capital and capital gain for the first three years of their investment. Repatriation is possible once a year under current regulations.

There is a plan to increase the ceiling on foreign participation to 25% and lower the time limit for transferring the original investment to one year. With the removal of obstacles to foreign investment Iran could potentially have a 2,000-3,000 billion US dollar stock exchange market.[28]

Besides, foreign investors can bid in Iranian privatization tenders (Foreign Direct Investment), but need permission from the Economy Ministry on a case-by-case basis.[29] Iran has announced it will begin to allow foreign firms to purchase Iranian state-run companies, with the possibility of obtaining full ownership.[30]

A subsidiary of Iran's largest bank, Melli Investment Bank with branches in Dubai (UAE) and London, has plans to launch a fund of $300 million to invest in Tehran's Stock Exchange, providing the first chance for foreigners to invest in the Iranian economy. The fund will be composed of blue chip companies such as Iran Khodro and Arak Petrochemical Company (a subsidiary of National Iranian Petrochemical Company), registered in the Cayman Island and managed from Iran.[31]

Firms such as Iran Khodro Company, Ghadir Investment Company and National Iranian Copper Industries Company are currently present in the bourses of Germany, Bahrain and Malaysia (2009).[32] Iran is also to target foreign investment in its energy sector by creating an umbrella group of nearly 50 state-run firms and listing its shares on four international stock exchanges.[33]

The "Turquoise Iran Equity Investments" from the London-based investment boutique Turquoise Partners is one of the few opportunities for foreign investors to participate on the Tehran Stock Exchange. Turquoise Partners publishes one of the few English newsletters that covers developments of the Tehran Stock Exchange and the Iranian economy called "Iran Investment Monthly".[citation needed]

See also


  1. ^ Value of Tehran Stock Exchange to top $70b
  2. ^ BBC:
  3. ^
  4. ^
  5. ^ a b c d e f g
  6. ^
  7. ^
  8. ^
  9. ^ Iran Daily - Domestic Economy - 11/11/07
  10. ^
  11. ^ Justice Shares Payment SoonRetrieved December 25, 2008
  12. ^ "BBC". BBC. 2006-07-16. Retrieved 2007-07-17. 
  13. ^ Iran Daily - Domestic Economy - 02/10/08
  14. ^
  15. ^
  16. ^
  17. ^
  18. ^ The Tehran Stock Exchange: A Maverick Performer?, Middle East Economic Survey, May 23, 2005
  19. ^
  20. ^ Iran – Ambitious modernization program for the Tehran Stock Exchange
  21. ^ Iran Daily - Domestic Economy - 09/13/07
  22. ^ Iran Daily - Domestic Economy - 09/17/07
  23. ^
  24. ^
  25. ^
  26. ^
  27. ^ [1]
  28. ^ Press TV - TSE foreign investment ceiling to rise
  29. ^
  30. ^ [2]
  31. ^ Financial Times: Iran fund opens bourse to foreign investors
  32. ^
  33. ^

External links


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