By Mahnaz Abdi

IME strengthening link between agricultural, financial markets

July 15, 2019

TEHRAN- Expanding the links between financial markets and commodity markets and strengthening the existing links between these markets is an approach Iran’s capital market has taken in recent years which has resulted in significant achievements in both commodity and exchange transactions in the country.

While this approach has been seriously followed up by the four exchange markets of Iran, i.e. Tehran Stock Exchange (TSE), Iran's over-the-counter (OTC) market known also as Iran Fara Bourse (IFB), Iran Energy Exchange (IEE), and Iran Mercantile Exchange (IME), IME’s performance in this due is in fact prominent.

Of the significant measures taken by IME to this end it could be referred to offering agriculture products at guaranteed price instead of the guaranteed purchase of these products by the government, which brought satisfaction for both farmers and the government.

In the framework of the guaranteed-purchase scheme, instead of paying the whole price to the farmers based on the guaranteed purchase, the government pays them just the difference between the base price and the price offered at the IME. In this way the financial burden on the government is reduced noticeably.

Guaranteed-price plan also brings more satisfaction for the farmers as they receive the payment sooner.  And the other advantages of this plan are creating transparency in the trades and also offering the products based on the specified standards in the IME which leads to promotion of their quality.

Also, in this plan prices are set fairly because the dealers are omitted from the chain of sales.

And now, IME has a new plan for more link between commodity and finical markets and it is establishment of some agriculture products funds, as announced by IME Managing Director Hamed Soltani-Nejad in an interview conducted by IRNA on Sunday.

Referring to the creation of a proper ground for the expansion of link between agricultural and financial markets, the official said that the plan for boosting trades of agriculture products at IME has been following up through new measures such as launching derivatives market and now is the time for agriculture products funds.

Establishment of such funds will be in the framework of IME’s macro plans in the current Iranian calendar year (began on March 21), as Soltani-Nejad has said on June 24 that this exchange has prepared ten macro plans to improve its performance during this year.

Making the remarks, during the meeting of IME shareholders, he mentioned development of underlying assets through existing instruments, development of financial instruments for commodity-backed securities, expansion of market size and depth, increasing cooperation with other organizations, and strengthening IME brand as some of the mentioned macro plans.

While IME has some prominent plans for this year, its performance has been also very positive in the past year.

Applying new financial instruments in Iranian capital market was one of the achievements of the country’s exchange markets during the past year. 

In this due, IME launched “option” in early March 2019 in an approach to diversify financing methods for agricultural products.

Option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option. 

All these measures have led to diversity of agricultural products trades at the IME and also formation of a new chain of financial instruments at this market which will be more expanded by establishment of agricultural products funds.

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