Tehran, Jan. 02(SENA) – Authorities in the Tehran Stock Exchange have already moved to establish a derivatives market in the country, but they have a “step-by-step” approach towards the issue, TSE’s CEO Hassan Ghalibaf said.
In a recent interview with SENA, he said: “We need to build the required infrastructure first and train those interested to be involved in the derivatives market.”
Ghalibaf called on financial experts and officials across the country to help develop derivatives, urging them to join TSE to offer appropriate trainings to the investors.
A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, index or security. Futures contracts, forward contracts, options, swaps and warrants are common derivatives. Derivatives are used for speculating and hedging purposes, as speculators seek to profit from changing prices in the underlying asset, index or security.
Financial officials hope that they will develop the IT infrastructure required for the expansion of the derivatives market in the coming months or years. Iran’s lack of access to the international financial markets in the past years kept its stock markets underdeveloped. With the sanctions having been lifted since January, the country has been trying to upgrade their financial tools in a bid to attract foreign investors.
“The development of derivatives along with cash equities needs upgraded software that would help investors avoid risks,” Ghalibaf said. “At present, we do not have the required software, which is a must for the investors who are after combined and complicated portfolios,” he added.
Although the financial instruments are yet to be developed, options are seen as the most attractive instruments in Iran’s capital market, he noted, urging all local and foreign investors to invest in the options market.
The option contracts give the buyer the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on a specified date.