According to the existing rules and regulations, over–the–counter markets have to receive a particular license for establishment and operation from the Securities and Exchange Organization of Iran. So, the regulatory body of the stock exchanges and OTCs is the same. The first Iranian OTC market received its operation license in 2009 and is called Iran Farabourse Co. It is engaged in financing of manufacturing and service companies by easing the process of listing of different securities. So, its major characteristic would be the easy process of listing and trading of securities.
However, the mission of Iran Farabourse Co. is the attempt to develop the capital market, diversification of the financial products, providing all new industries which are seeking for financial resources with new opportunities, improving public participation and increasing the share of financial assets in the investment portfolios.
THE ADVANTAGES OF LISTING IN IRAN FARABOURSE CO
- Easy finance
- More liquidity for stocks
- Tax exemption
- Easy, quick and low–cost transfer of stocks
- More price transparency
- Fair and integrated information for all existing and potential investors
- Using stocks as collateral for receiving bank loans
- Introducing the company and its products to the whole society and improving the company's credit
- Initial offering of some Islamic financial instruments
- Easy withdrawal from Iran Farabourse Co.
THE STRUCTURE OF OFFERING AND TRANSACTION IN IRAN FARABOURSE COMPANY
Transactions in Iran Farabourse markets are as follows:
- Initial offerings and secondary transactions of securities are executed in the first and second markets of Iran Farabourse co.
- Block offerings, gradual offerings and subscriptions are executed in the third market of Iran Farabourse co.
- Transaction of special securities, including depository receipts, Musharakah sukuk, housing loans securities, etc. are traded in specified market of Iran Farabourse co.
FIRST AND SECOND MARKETS OF IRAN FARABOURSE CO
The first market is a secondary market for listed companies shares & also funds units. While the first market is a secondary market for both shares & fund units, the second market is a market only for shares. The difference between the two markets is that listing qualifications for secondary market are easier that first market. For example, while for listing a share in the first market, it should be issued by a company with at minimum 10 percent floating shares & also at minimum level of 200 shareholders, for listing in the second market, the issuer should have only 5 percent floating shares & at minimum 100 shareholders.
AN INTRODUCTION TO BLOCK OFFERING IN THE THIRD MARKET
All securities which are not qualified to be listed in Tehran Stock Exchange or in the first or second markets of Iran Farabourse Co would be traded in blocks. In other words, this market does not include secondary trades of securities. However, there are three types of offerings executed in the third market of Farabourse:
- Block offerings of securities by shareholders. Here, a major (institutional) shareholder is to offer a certain block of shares of a particular company to the public.
- Gradual offerings include the collection of securities from minor shareholders. Here, the applicant is to buy a certain volume of a particular security.
- Subscription of securities, including the shares of public joint stock companies, Musharakah sukuk and depository receipts are executed upon the license issued by the SEO. Subscriptions of Musharakah sukuk are in the third market and the secondary trades of which are executed in the Musharakah sukuk market.
According to article 11 of "The Regulations on Listing and Offerings of Securities in Iran Farabourse Co.", securities permitted to be offered in the third market include:
- Shares of public joint stock companies,
- Preemptive rights of public joint stock companies,
- Bearer shares of public joint stock companies,
- Shares of capital increase in public joint stock companies,
- Depository receipts,
- Units of those ETFs and Real–Estate Funds which are not listed in other markets of Farabourse.
MUSHARAKAH SUKUK MARKET (FORTH MARKET)
All types of Islamic securities, including Musharakah sukuk, Islamic depository receipts and etc., with not less than three months before maturity date, would be listed in this market, provided that the secondary trades of which will be solely executed via Iran Farabourse company. All types of Musharakah sukuk (primary market), Islamic MBS, Ijarah sukuk, and depository receipts would also be traded in this market.
PROGRAMS AND STRATEGIES OF THE COMPANY FOR COMING YEARS
- Marketing for listing of new small and mid–size companies and also large companies which are not qualified to be listed in Tehran Stock Exchange.
- Shortening the period between receiving the listing application and listing of the company.
- Holding of training courses, exhibitions and seminars to introduce Iran Farabourse Company to the economic actives.
- Activating the third market of Farabourse for executing block transactions of non–listed companies.
- Improving the co-operations with major financial institutions in the capital market.