Friday, April 16, 2021
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ReportIranian exchange to roll out regulatory-fintech sandbox for capital market

Iranian exchange to roll out regulatory-fintech sandbox for capital market

As the Iranian government continues to prioritize financial and banking reforms under its five-year development plan for 2016/17–2021/22, the Iran Fara Bourse (IFB) or Farabourse, one of four exchanges in the Islamic Republic, prepares to launch new products and initiatives to boost the domestic capital market.

One of these initiatives is the capital market sandbox to be headquartered at the IFB, which will be launched in the coming months. “It will be part regulatory sandbox and part fintech sandbox, as we prepare an environment for fintech companies and also accelerate the drafting of new regulations,” Mahsa Tavakoli, the strategy director of the IFB, told IFN, the sister publication of IFN Fintech.

Also coming soon is the Negotiation Market, which includes a board that will oversee negotiation deals between listed companies — the third market to be introduced following the recent launch of the Unlisted Trading Privileges Market for companies that are unlisted or have been delisted on the exchange but can still be traded, and the Mergers & Acquisitions Market for both listed and unlisted companies.

These initiatives come on the heels of the recent Crowdfunding Market and the Sukuk Index concurrently launched in February 2020, as well as the introduction of non-guaranteed Sukuk facilities that could be issued with only a positive credit rating backing the securities.

“Typically, Sukuk issuances are guaranteed by commercial banks, holding companies or insurance companies. Now, they can be guaranteed by any one of the three credit rating agencies in Iran, which are also licensed and regulated by the Securities and Exchange Organization,” explained Neda Bashiri, the structured financial product market manager of the IFB.

“The non-guaranteed Sukuk facilities are structured under the concept of Ijarah, which means there are common shares — owned by both the issuer and the SPV. In the event of an issuer defaulting on the Sukuk, the SPV can sell those shares in the market and settle with the investors,” Neda added.

At least two companies — subsidiaries of the Iranian Social Security Organization that are listed on the exchange — are expected to issue non-guaranteed Sukuk in the coming weeks. The Farabourse is also preparing to issue a green Sukuk paper, and launch a futures index as a derivative of the Sukuk Index.

This is an excerpt of an interview with Mahsa Tavakoli and Neda Bashiri, respectively the strategy director and structured financial product market manager of the Iran Fara Bourse. For the full discussion on the new initiatives of the exchange, log on to IFN Podcast.

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