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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2010TEHRAN STOCK EXCHANGEHassan GhalibafCEODespite the widespread financial crisis in theglobal market, TSE had the IPO of its largestever listed company, TelecommunicationCompany of Iran (TCI) in August.Iranian capital market experienced a flourishingyear 2009 in the 41st anniversary of TehranStock Exchange (TSE)’s operation, and thetrend is expected to continue in 2010.Ratification of the securities market law in 2005was a step to develop the Iranian capitalmarket, and the subsequent measuressupported the idea. Tehran Stock ExchangeCorporation was established in 2006 as ademutualised exchange, aiming to set up aregulated, transparent, efficient and fair market,and to promote investment in securities andincrease liquidity.During the previous years, as stated in the law,the country’s capital market has followed theestablishing of structures for development andhas attempted to provide the requiredcooperative grounds among all market’sparticipants to create value for direct andindirect stakeholders.In this fashion, TSE feels committed to grant fairmechanism and enough access for themembers and participants to trade securities.Accordingly, escalating market’s liquidity wasset as one of the main ambitions of TSE.Great efforts were made during 2009 toincrease liquidity. As a result of some studies atthe Exchange, price daily fluctuation range wasincreased for all listed shares and the biggerissuers’ base trading volume was cut.Also, final auction mechanism was proposed todiscover the closing price, and single-priceauction was introduced as a means to avoidmarket’s fluctuations. Besides, some executivesolutions were suggested to the Exchange andSecurities High Council, the premier body of theIranian capital market for approval. Marketmaking directive was reviewed and moreincentives were added for more participation.TSE welcomed new issuers in 2009. Insurancecompanies and oil and gas extraction industryincreased TSE’s sectors to 39 and turned theExchange into one of the most diversified ones.IPOs of three big public banks and insurancecompanies increased our market capitalizationto above US$ 58 billion at the end of 2009, a 20percent rise comparing 2008. Trading value,with ten percent increase than 2008, reachedthe new record of plus US$ 16.8 billion lastyear.Primary studies have been accomplished ondiversification of trading products. Stock futuresand options are expected to emerge shortly inthe Exchange after the software selection isfinalized. Moreover, launching stock ETFs, aswell as gold-backed ETFs was fully surveyedand the proposed rulings were sent to SEO forapproval, the market’s regulatory body.TSE has planned to keep on its growing trendto build the required foundations and changetrading rules for more facilitated access to atransparent and fair market, and also will try tobenefit the international bodies’ technicalsupports.HISTORY AND DEVELOPMENTTehran Stock Exchange (TSE) was founded in1967, by starting with only six listedcompanies. Since then, the Exchange hasexperienced considerable changes in the pathof development. Today, three years after itsdemutualization, which took place on 6December 2006, TSE has graduallydemonstrated its potentiality as a leadingExchange in the region and developed into anever-growing marketplace, including more thanthree hundred listed companies with a marketcapitalization of above US$ 60 billion.The mission is setting the agenda for thechange in the Iranian securities markets. TSEmust be more than a mere market facilitatorand ought to be able to guide industriestowards new horizons and greateropportunities, as it is actually doing through thestrict regulations and listing standards. TSE isaiming at promoting the Iranian Capital Marketto respond to the socio-economic developmentneeds of the nation. The Exchange helps andstimulates industrial, as well as economicgrowth and development of the country'sfinancial sector. TSE is preparing to maintain astrong and transparent market in order to giveopportunity to the investors to convert theircash into securities at a fair and honest priceand vice versa, and is developing to become ahighly liquid secondary market for securities toraise funds and win confidence from allstakeholders.TSE is planning to operate as a world-classmarketplace for Iranian securities andderivatives products. It strives to offer issuersaccess to a wide national marketplace. It mustmake a contribution to Iran's status as aneconomy, which intends to open-up tointernational financial centers. By servicingIran's substantial long-term demand for capitaland exchange services in accordance withinternational standards and practices, it isbelieved that TSE has the potential to becomeone of the pre-eminent Exchanges in thePersian Gulf area.Privatization, as a priority is both followed bythe State and managed by TSE on the onehand, to facilitate the economic reforms, andon the other one, to improve and support theIranian securities market. In this fashion,among the floated companies since January2009, shares of some state-owned banks andinsurance companies were traded for the firsttime in the Exchange.For the coming year, introducing derivatives isin the agenda.FUTURE OUTLOOK• Continuation of privatization plan and IPOs ofstate-owned companies• Increasing liquidity in securities market with areview on trading regulations• Launching derivatives market andintroducing stock futures and options• Establishing Islamic bonds and products,based on market development act and taxexemption• Introducing new indices• Setting up required mechanisms for trackingfrauds and claiming against breach of marketlaw• Creating efficient corporate governance andinvestor relations frameworks• Facilitating and expanding market accessby means of developing brokerage network,e-trading and DMAPAGE 146