IME at a Glance

Iran Mercantile Exchange was established on September 20, 2007 in accordance with the article 95 of the Law of the Securities Market of the Islamic Republic of Iran. Prior to formation of the IME, two commodity exchanges, the Iran Agricultural Commodity Exchange and the Tehran Metal Exchange, were operating in the Iranian capital market providing physical trading services to the market participants. By the merger of the two markets in 2007 a more stronger, integrated and organized commodity market was established as the IME. The merger turned a new leaf in the Iranian capital market providing endless trading opportunities for the commodity market clients in and out of the country. At the moment, a suite of physical trading platform, risk mitigation solutions and financial instruments are on the shelf for a wide range of stakeholders from the upstream to the downstream industries, from the manufacturing sector to the consumer market.

The Physical Market

Various sectors of the economy and a large scale of the manufacturing industries benefit from the operation of the physical market of the IME. The physical trades are conducted both in the main physical trading floor designed for the domestic market participants and the export trading floor which is a specialized platform for offering the export commodities to foreign buyers and traders.

The Physical Trading Platform

The exchange provides the infrastructure for the industries like metals, minerals and petrochemicals to list and offer their commodities on the exchange's physical trading floor for sale. Distinguished steel companies, copper and aluminum producers, petrochemical industries and a wide range of petroleum refineries and bitumen producers sell  to a wide range of buyers from across the downstream sector  purchasing their raw material required for manufacturing from this market. Transparency of trades and high liquidity of the market, has elevated the status of the discovered prices of the exchange as reference the internal and regional market participants as well as the government and the regulatory bodies.

The Export Trading Floor

The export trading floor of the IME offers physical trade services to the foreign clients and the Iranian exporters alike. Foreign companies and traders place purchase orders with the brokerage firms of the IME. After matching of the trade and full settlement of trade value, the commodity can be exported to global destinations by the buyer. The purchased commodity is not allowed for use, consumption or re-sale in the domestic market.

Listed Commodities

Industrial Products:

Steel sections including but not limited to the steel billets, rebars, slab, beam, tin plates, colored and galvanized sheets and HRS coils,  U and V channels, iron ore and sponge iron;

Base metals like copper, aluminum, zinc and lead in various forms and dimensions;

Types of cement;

Precious metals.

Petrochemicals and Refinery Products:

The tradeable petrochemical commodities range from types of polymers PP, PE, LDPE, LLDPE, to aromatics like benzene, and the group of SBR, PS, MS, and likes of them;

Chemical products are also within the tradeable commodities like caustic soda, melamine, acids, gas feedstocks and others;

The oil related products range from bitumen, base oil, RPO, to slack wax and other side materials of distilation.

Agricultural Products:

The agricultural products traded in the IME range from saffron, cumin seeds, raisins, dates, pistachios and grains like wheat, feed wheat, feed barley, yellow corn, maize, lentil, chickpeas, and softs like sugar. Aside from the physical market, the mentioned agro products are available in the form of financial products on the CDR and derivatives platform of the IME.

Brokers

There are 90 listed brokerage firms operating as a trade (not a clearing) member in the IME who are licensed by the Securities and Exchange Organization of Iran (SEO), the capital market regulatory authority. The brokers trade on behalf of the clients and not to their own benefit. To purchase a physical commodity or take position in any derivatives or financial contracts one should contact a broker of the exchange to get a trading code and start trading. Therefore, getting registered with a brokerage firm is key to trade in the IME.

Market Announcement on Trading Sessions

The commodities scheduled to be offered and traded at a certain date on the physical market of the exchange are displayed 24 hours before the trade session on the IME website under the term export offering notice which provides information for the foreign clients of the export market of the exchange. The identical section for the domestic clients can be found under sub-menue of the offering notice.

Physical Trade Types

Based on the settlement terms mentioned in the Export Offering Notice, physical market commodities of the IME are offered and traded on the following bases:

   -  Cash Trade:  It is defined as prompt payment against prompt delivery. After matching of the trade, the buyer makes good on full settlement. The clearing house transfers the contract value immediately to the seller's account. The buyer takes the commodity from the warehouse after full settlement.

  -  Forward: It is defined as prompt payment (at a lower-than-the-current-market rate) against forward delivery. The client pays the contract value after matching of the trade and will receive the commodity at a later date maturity specified in the offering notice. This possibility provides a short-term capital raising solution for the seller to receive the value of the commodity to be produced in the future or a given span of time.

  -  Credit: In credit contracts the buyer receives the commodity after the trade matching but pays at a later date maturity (usually at a highher-than-the-market rates) in the form of deferred payment against prompt delivery. In this type of transaction, the buyer pays at a future date stated in the notice of offering.

Sub-divisions of the Physical Market

There are a number of sub-divisions to the physical market of the IME (currently available for the domestic market participants only) as follows:

      -  Side Market: designed for trading of non exchange-listed commodities and off-grades.

      -  Real Estate Market: an instrument for sales and purchase of housing units, land, real estats, etc.

      -  Premium Trades: bidding on premium/discount of commodity price to be traded at a maturity.

      -  Tender Market: a platform for government and private sector tenders, art works, procurements.

The Derivatives Market

Futures Contracts

The futures market of the IME operates the trade platform for saffron, gold ETFs and silver grains (pellets) as the active underlying assets. Other listed undelying commodities are pistachios, cumin seeds and copper cathode. To start trading, clients need to contact a broker to register with the exchange and get a trading ID or trading code. Once the trading code is issued, buyers may open their own accounts with the clearing house of the exchange and take or offset positions at any time before the maturity. Open positions at the maturity are subjct to either mandatory delivery of the underlying asset or closing off with penalties. 

Options Contracts

The options market of the IME as a sub-division of derivatives market provides trading platform for professional traders on Emami gold coin (Minted by The Central Bank) and saffron.

The Financial Market

The financial market of the IME provides diverse financial instruments and investment opportunities on the physical commodities. In other words, the financial market of the exchange is the venue for writing and issuing securities based on commodity. This provides an opportunity for corporate and/or retail investors to trade commodity securities instead of physical commodity and gain from price movements or the profit of such securities as an investor.

The financial contracts of the IME are available in the following forms:

Commodity Depositary Receipts (CDR) 

CDRs are warehouse receipts issued against a certain amount of commodity stored in a listed warehouse of the IME. The warehouse receipt issued by the IME is a security tradeable on the secondary market of the TSETMC. At the moment, the available CDRs on the secondary market are saffron, pistachios, Emami gold coin, cement, chickpeas, green cumin seeds and iron ore.

Standard Parallel Salam (SPS)

The SPS is a sukuk security designed to operate as both an investment solution and a financial tool to provide the finances needed by the manufacturing and industrial units. The issuer of the security (industrial unit) receives the investments of the buyers of the security to fund its production line with working capital. The short term (one-year) investment security of SPS is interest-bearing and puts the holder at the advantage of taking physical delivery of the commodity at the maturity; otherwise, the holder offsets the security at the market price benefiting from the profits of Musharakah.

Commodity Funds (Commodity ETFs)

An investment solution on commodities for those investors who opt for benefiting from buying and trading of the units of an ETF managed by commodity professionals instead of involvement in direct commodity trading.

Debt Securities

The securities issued by a creditor at a discount rate.

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The Built-in Clearing House

The clearing house of the IME is a division of the exchange. It receives and manages collaterals pledged by the clients and oversees the clearing, settlement and delivery in the physical trades.

International Presence

As a thriving market with a wide spectrum of domestic and foreign customers, the global business development strategies of the exchange are in line with developing ties with the world-class bodies in order to be part of the global financial community.

The IME is a full member of the Association of Futures Markets (AFM) and performs as an affiliate in the WFE.